Will General Motors Abandon Korea?
Rumors are spreading that General Motors is planning to pull out of Korea. GM Korea posted a loss in the first quarter of this year and Korea Development Bank, which is the second-largest shareholder of the automaker, said it cannot stop it from pulling out.
GM's headquarters office in Detroit is apparently becoming extremely concerned about the labor union at the Korean subsidiary, which belongs to the militant Korean Metal Workers' Union.
GM has been shutting down operations around the world that were not generating revenues. It has closed plants in Australia, Indonesia and Russia since 2013 and announced in March of this year that it agreed to sell the Opel brand in Europe to France's PSA Group. It decided in May to pull out of India as well.
After acquiring the bankrupt Daewoo Motor in October 2002, GM pledged to manufacture cars in Korea for at least 15 years. That means it would be free to leave after October. GM owns a 76.96-percent stake in GM Korea.
GM Korea suffered cumulative losses of more than W2 trillion from 2014 to 2016 to reach a state of capital impairment, when a company's investments have declined in value to less than what is recorded on its balance sheet.
Its domestic sales plunged 17.4 percent from January to July compared to the same period of 2016. Three new models -- the All New Cruz compact, mid-sized Malibu sedan and Spark subcompact -- have fared poorly in showrooms. Unfazed, unionized workers decided last month to go on strike for a 7.2-percent wage hike, a 500-percent bonus and an extension of the retirement age to 61.
CEO James Kim abruptly announced his resignation last month, while KDB in a report warned of the U.S. automaker pulling out of Korea.
GM Korea denies the rumors. The company "has spearheaded the development of the Spark subcompact and Trax small SUV, while the Bolt electric vehicle was created by its design center in Bupyeong, Gyeonggi Province," a spokesman said. "Once the Opel sale is completed, GM Korea will see its role increase by overseeing the development of GM's global compact car."