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GM Daewoo has decided to halt production at all its production facilities from Dec. 22 until Jan. 4 next year. The stoppage stems from worsening exports amid the global economic slowdown. Chances are that GM Daewoo plants that roll out SUVs and mid-sized sedans, whose sales have dropped especially sharply, will be closed for the entire month of December. Renault Samsung, meanwhile, is rumored to stop production soon. Dark clouds hanging over the global automobile industry are now gathering over Korea.
The Big Three U.S. automakers -- GM, Ford and Daimler Chrysler -- are already unable to continue operating without government help. Toyota, the worldĄŻs largest automaker, saw its first-half sales drop 6.3 percent from on-year, while operating profit dropped 54 percent. After laying off 3,000 non-regular workers so far this year, Toyota plans to let go another 3,000 before the end of this year and cut down production by 400,000 vehicles. Other Japanese carmakers, including Nissan, are getting ready to lay off workers and cut production. In Germany, Volkswagen has decided to lay off 20 percent of its contracted workers, and carmakers in Europe face painful restructuring.
Korean automakers have been faring better since a major portion of their product lineup are medium-sized and small cars that are less sensitive to economic downturns, while the strong yen has made Korean cars more than 20 percent cheaper than their Japanese rivals. But recently, Korean carmakers have been facing difficulties selling small cars overseas as market conditions in advanced countries are worsening rapidly, with sales of Korean cars there falling between 10 to 20 percent starting last year. The death throes of the Big Three automakers and the painful restructuring at Japanese and European carmakers are no longer the problems of others.
Many experts believe that if carmakers overcome this crisis, the global automotive industry will take off again. The projections come from potentially huge demand from emerging economies that will replace advanced countries, whose markets are saturated. Brazil, Russia, India and China accounted for a total of 10.27 million automobiles, which was less than 60 percent of the 17.47 million sold in the United States. This year, the BRICs markets are expected to exceed the American market by 10 percent. Demand for cars in the worldĄŻs advanced countries has been falling 0.2 percent every year since 2000. But demand in emerging countries has risen 12.9 percent.
But the opportunity will be available only to those carmakers that survive this crisis. Executives with Korean carmakers and their unionized workers must realize the real conditions in the global auto industry and show iron resolve. And the government must keep a close eye on the American and European car industries and look for ways to support domestic carmakers and their suppliers.
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