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It’s Looking Increasingly Likely That GM Korea Will Fold

The future of GM Korea looks bleaker than ever. With one week left for GM Korea and the union to reach a deal, some analysts believe it still won’t be enough for a sustainable business.

Bloomberg reported on Thursday that ahead of the April 20 deadline for GM Korea to submit a turnaround plan to the South Korean government, bankruptcy seems more likely. The union must agree to cost cuts and concessions, while GM has proposed a $2.8 billion investment and a $2.7 billion debt-to-equity swap. The KDB, Korean Development Bank, has yet to say if it will inject funds into the failing business, and GM has asked for the government to co-invest alongside it.

Lee Hang-koo, a senior research fellow at state-run Korea Institute for Industrial Economics and Trade, said the moves may not be enough to save GM Korea.

“GM has said that it would be inevitable for them to follow suit of the Australia case if the cost at the Korea business keeps rising,” he said.

GM Korea’s downfall has come as the automaker slowly exited unprofitable markets. The local unit once exported cars to Europe, India and Russia—all markets GM no longer does business in. As exports slowed, union costs rose in part due to incredibly high wages. According to the report, GM Korea has racked up a $1.8 billion loss since 2016.

Now, GM must make a decision in South Korea. Noting GM CEO Mary Barra’s track record, its Korean presence may not be long for this world.

Former GM Authority staff writer.

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Comments

  1. Interesting, but how does this affect US consumers.

    Reply
    1. It will probably have an effect on where we source certain vehicles. Some Chevys, like the Spark, come from GM Korea. Although GM is axing the Spark, and probably others, this still leaves fewer production facilities for GM to choose from for building smaller cars. I believe that GM Korea is also responsible for many of Chevrolet’s vehicle designs. Hopefully this leads to more local production and design, but I’m not holding my breath, unfortunately. We’ll probably be getting more Chinese cars in the future.

      Reply
    2. GM loses about 3,000 Korean engineers developing various GM platforms and powertrain.

      GM’s bankruptcy plan calls for keeping this engineering center and shedding the production lines, but what likely will happen is that the Korean government will take over GM Korea and run it themselves as Daewoo once again. Korean government considers GM’s mismanagement to be the root cause of GM Korea’s problems and believes that they can run Daewoo much better than GM could, hence if GM Korea enters bankruptcy, GM will lose it.

      After the loss of Opel and GM Korea, GM loses about 60% engineering capacity, and this loss has to be made up by Shanghai GM’s engineering center, but how reliable is that.

      Reply
      1. Barra and Amman are short-sighted Wall Street hero’s who may well push stock price up to $50 a share by years end.
        I suppose, like FCA and certain other European automakers, GM can by engineering expertise from third parties but this will be a GM in decline as will a them relying solely on US and Chinese expertise.
        The best of GM engineering, aside from Silicon Valley investments, has come from Opel and, yes, Korea. Quality product like Encore is a great example of Korean talent.
        No MAGA wet dream can compensate for a 60 percent loss in engineering talent as GM gets ready for kits. GM is the only domestic to be on par with Asian imports, for now.
        GM keeps shrinking. PSA is proving Opel’s viability, SAIC will demonstrate India’s value. Holden is a shell of it’s former self trapped with PSA made product, and Korea is about to
        In the short-term profits will surge; in the not so distant future, though, GM will become a regional player lacking in industrial scale. The General will become a Ford-like regional player regardless of how good a Tesla/Uber fighter they become.

        Reply
  2. Interesting to see where to for GM Holden now on. GM sales are diving, people don’t want to buy rebadged Opels, 150 days of inventory on hand and about 50% of their line up is from GM Korea.

    Add the biggest marketing failure in GM’s history and we sell 50k cars a year. 13,000 cars sitting on grass…

    Seems Australia will follow and GM will close the shop sooner than we think if GM Korea folds.

    Reply
    1. “interesting to see where to for GM Holden now on.”

      From Shanghai GM, I suppose.

      GM sells 4 million vehicles in China a year. This doesn’t come free and GM has to scratch Chinese government’s back, by exporting some Chinese built vehicles out, to Australia and the US.

      Reply
      1. Please explain with sources.

        Reply
        1. Asking a fellow poster to source, annotate as to what specific publication they are basing an opinion on, is the height of snarky condesention.
          Ultimately, unless we are part of GM senior management, most posters are expressing opinion peppered with facts that they have read on Automotive News, Wards, Detroit Free Press.
          I agree with TV Monitor that both GM and Chinese partners would prefer China as a global export hub. GM is becoming overly reliant on China even though massive profit (and R&D dollars) are lost via the J/V system.
          Long-term Ford may be better positioned with it’s EU operations than The General is in China–a nation with such poor economic planning that a day of reckoning is all but assured; a country that has a tense geopolitical relationship with it’s neighbors and Washington; an Empire with cultural, politic and a economic fissures so deep that harmony is only maintained at gunpoint.
          If you desire annotation simply read The Economist, The Times and Guardian for a few weeks.

          Reply
          1. Was not written as an opinion. Was written as fact. Not my issue his writting is unclear.
            Yours was one long opinion. Opposed by fact and common sense but clearly an opinion. Fyi the economist stopped being credible many years back.
            One question: do you think ford would trade its european ops for gm china ops?

            Reply
            1. Ford would keep Europeans operations.
              Ford made over 1 Billion in Europe last year proving that EU anti-union propoganda and over regulation has been hype. Ford dramatically reduced it’s European footprint during the financial crisis, something Opel failed to address in a meaningful way. We see PSA starting the process by reducing the work week to increase factory utilization.
              The Chinese market still contains a lot of ifs and maybes. China being a self-declared geo political foe of the US creates a questionable long-term future for US automakers. China has a long tradition of disregarding international business norms. During an economic downturn or political disagreement over the South China Sea would anyone be shocked if Beijing nationalized the GM-SAIC JV? This sounds insane, right, unless hostilities between China and the US happen over Taiwan or the many other hot spots.
              The JV reduces all profits by half while putting GM at risk of intellectual property theft. Yes, GM currently sells a lot of cars in China but like Russia it is a risky business environment.
              Ford is once again making money in Europe, doing business in China, and some would argue that it has a more well-rounded business footprint spreading risk further than just the Americas and China.

              BTW, The Economist is by far the most thoughtful business publications in print only rivaled by FT.

              Reply
              1. Reply
      2. They won’t be getting anything from China, that would give credence to the Chinese vehicles currently sold in Australia.

        The Thai factory where the Colorado comes from will also fold – you think asians will buy these vehicles from a company that could leave tomorrow leaving you with a worthless vehicle ?

        Reply

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