As losses mount, talk of GM exiting South Korea grows

Cars made by GM Korea at its Bupyeong plant before they are transported to Incheon, west of Seoul, for export. © Reuters

As losses mount, talk of GM exiting South Korea grows.

By KIM JAEWON, Nikkei Asian Review, Sept. 26

Automaker has pulled out of some countries to focus on US, China.

SEOUL -- General Motors' global strategy of pulling out of underperforming markets is weighing on South Korea as the U.S. automaker's local unit is struggling with mounting losses and conflict with labor unions, analysts said Tuesday.

GM could shut down or cut its production lines in the country as it did in Europe, Australia, South Africa and India as part of restructuring to focus on its two key markets of the U.S. and China, analysts said.

GM completed the sale of its European unit Opel to PSA last month. The Detroit-based automaker also announced that it would close its Australian entity Holden by the end of this year. Earlier this year, GM said that it would not sell its cars in the Indian market, using production lines in the country only for exports.

"We believe that GM is highly likely to withdraw from the South Korean market. GM Korea is suffering from big losses for the last few years, losing its market share to imported brands," said an analyst at a major local brokerage house, asking not to be named. "There is no reason that the company keeps its business here."

GM Korea posted a net loss of 619.4 billion won ($544.7 million) in 2016, extending losses of 993 billion won in the previous year. The company sold 10,004 vehicles in South Korea in August, down 21.7% from a year ago.

Lee Hang-koo, a senior researcher at the Korea Institute for Industrial Economics & Trade, said: "In the perspective of GM's headquarters, GM Korea is a relatively inefficient unit due to big losses and high labor costs. Labor strikes also gave bad image of the top executives of the company." Lee visited the automaker's headquarters in Detroit in 2015.

GM Korea representatives did not respond to repeated calls for comment.

GM's three affiliates own a combined 76.96% stake in GM Korea, followed by Korea Development Bank which holds 17.02% and SAIC Motor with 6.02%. GM moved into South Korea in 2002 when it bought Daewoo Motor from KDB and other creditors. Daewoo declared bankruptcy in the aftermath of the Asian financial crisis in the late 1990s.

KIIET's Lee said that rumors of GM's withdrawal are rife because KDB will be no longer have a veto right in the boardroom after Oct. 16. The KDB was given the special right for 15 years after it sold Daewoo.

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