GM To Shut One South Korea Plant, Decide On Fate Of Others Within Weeks
The move is the latest in a series of steps the U.S. automaker has taken to put profitability and innovation ahead of sales and volume. Since 2015 GM has exited unprofitable markets including Europe, Australia, South Africa and Russia
General Motors Co said it will close one of its four plants in South Korea and incur an $850 million impairment charge as part of a restructuring of its money-losing business in Asia's fourth-biggest economy.
The U.S. automaker said it would decide the future of its remaining South Korean operations within weeks, and is in talks with the government and labor unions on how to cut costs and make the business profitable.
"Time is short and everyone must move with urgency," GM President Dan Ammann told Reuters.
The move is the latest in a series of steps the U.S. automaker has taken to put profitability and innovation ahead of sales and volume. Since 2015 GM has exited unprofitable markets including Europe, Australia, South Africa and Russia.
GM's plan places South Korean President Moon Jae-in in an uncomfortable spot as he has pledged to create more jobs and provide job security as his top economic policy. Opposition lawmakers criticized Moon's administration on Tuesday for the potential job losses from GM's strategy for the country.
The South Korean government said in a statement it regretted GM's "unilateral" decision to close the plant. It said it wanted to conduct an audit of the automaker's local arm, GM Korea, as it weighed options to help with the restructuring plan.
GM said in a statement it would take the $850 million charge to reflect the restructuring costs, including $375 million in cash related to employee expenses. Most of the financial writedowns would be recorded by the end of the second quarter.
South Korea had for years been a low-cost export hub for GM, producing close to a fifth of its global output at its peak. But sharp rises in labor costs, weakening demand for sedans, which GM Korea mainly produces, and big investments in neighboring China hurt the South Korean business's competitiveness.
The plant shutdown is part of its broader Asia business restructuring. Excluding profits from China, GM said its Asian operations lost money in 2016. GM Korea posted a total of 1.9 trillion won ($1.8 billion) in net losses between 2014 and 2016.
In recent years, GM ceased manufacturing in Australia and Indonesia, and significantly restructured its Thai operations. It said in May it is winding down efforts to sell cars in India and is turning its manufacturing facilities there into an export hub.
The automaker's decisions to exit other unprofitable markets have exacerbated problems for GM Korea, which used to build many of the Chevrolet models GM once offered in Europe. Declining sales of small cars in the United States have also hurt demand for Korean-made Chevrolets.