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General Motors Believes GM Korea Will Turn A Profit Next Year

GM Korea averted bankruptcy with last-minute labor concessions from the local auto union, and now, the South Korean government hopes the automaker’s lifeline will position it for success.

But, General Motors and South Korea have very different viewpoints for when GM Korea may return to profitability. Reuters reported on Friday that the U.S. automaker believes GM Korea will return to the black next year. South Korea and state-owned Korean Development Bank think 2022 is the more realistic goal.

The automaker and the KDB signed a $7 billion investment package to bail out the failing entity this week, which gives GM Korea ten years to put itself back on track. Per the agreement, GM cannot exit the investment for those 10 years. After a decade, GM will be free to do what it sees fit. Still, the automaker thinks a $400 million or $500 million profit is possible in 2019.

South Korea’s timeline comes from due diligence the KDB completed to make a final decision on GM Korea. The state-owned entity agreed to provide $750 million for the unit, though still took a cautious tone over its short-term prosperity.

The due diligence report claims labor cost cuts will be the driving factor to push GM Korea back into the black. Last year, GM Korea lost $1.1 billion.

Former GM Authority staff writer.

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Comment

  1. Turning Korean developers and producers into profitable, that’s good. Next time, it’s time for GM to gurantee the plan is sustainable enough to keep GMK afloat after overpassing ten years. There’s too many people that can’t trust GM’s speeches: some say GM can withdraw its factories entirly after ten years(the governmentand GM.promised that GM should stay in Korea for ten years, not much mentions of afterwards), some still doubt that service and product package will become competitive, some doubt GM’s plan to let GMK become Asia-Pacific HQ would help Korean producer (saying Asian market without China is too small – AP HQ is seperated from Chinese market).

    Just hope everything is going sustainable for producers, developers, dealers, labours, and customers in Korea. I am really hope so…

    Reply

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