GM is on a major restructuring spree with many unprofitable business units in India, Russia, Western Europe and Southeast Asia, either getting closed or getting shrunk. The latest to come under chief executive Mary Barra’s radar is GM Korea. According to the latest release from GM Korea, since the Gunsan facility has been continuously underperforming, they have decided to shut it down by May 2018. This decision follows a careful review of all the significant losses incurred by GM korea for the past several years.
Kaher Kazem, president and CEO of GM Korea, explains, “This is a necessary but difficult first step in our efforts to restructure our operations in South Korea. We recognise the contribution and support of our employees, the wider Gunsan and Jeonbuk communities and government leaders, particularly through the most recent difficult period.” GM Korea is committed towards supporting all the employees who would be affected by this transition.
However, a viable option is being chalked out for significant product-related investments in South Korea and the company expects full support of the labor union, the South Korean government and key GM shareholders to preserve thousands of jobs.
Barry Engle, GM executive vice-president and president of GM international, said, “The performance of our operations in South Korea needs to be urgently addressed by GM Korea and its key stakeholders. As we are at a critical juncture of needing to make product allocation decisions, the ongoing discussions must demonstrate significant progress by the end of February, when GM will make important decisions on next steps.”
Besides truncating a large portion of the factory space, GM is also taking charge of $850 million, which also includes $475 million of non-cash asset impairments and up to $375 million of primarily employee-related cash expenses. GM would record this by the end of the second quarter of 2018 and will be excluded from the company’s EBIT-adjusted and EPS-diluted-adjusted results.
GM Korea has made significant contributions to the Korean economy and the automotive industry by producing cars that were mainly exported to dozens of countries. GM Korea is a large export hub for other Asian markets as well as Europe that was a strong platform for the whole Chevrolet brand. GM Korea is also responsible for several engine plants and an engineering centreand is largely credited for the Chevy Bolt electric car.
GM Korea has produced over 10 million vehicles since its establishment in 2002. It supports approximately 200,000 direct and indirect Korean jobs. In 2017, GM Korea sold 132,377 units in Korea and exported 392,170 vehicles to 120 markets around the world.