General Motors has announced plans to close one of its four South Korean assembly plants in an effort to stem a tsunami of red ink.
As it attempts to stabilize (or cut) unprofitable overseas operations â€” an effort that led to the sale of its European Opel and Vauxhall brands last year â€” GM will close its Gunsan, South Korea plant by the end of May. That facility, which employs 2,000 workers, builds the Chevrolet Cruze sedan and Orlando MPV, a boxy, three-row vehicle that almost made it to American soil.
“The Gunsan facility has been increasingly underutilized, running at about 20 percent of capacity over the past three years, making continued operations unsustainable,” the company wrote in a statement late Monday.
GM, which gained a major manufacturing presence in the country after buying up the remains of bankrupt Daewoo in the early 2000s, wants to stick around. The automaker has floated a plan to its Korean labor union and the country’s government (which owns a non-controlling stake in the company) outlying a strategy to reverse falling sales and turn a profit. Part of the plan includes cutting dead weight, like Gunsan, while investing in new product.
“The performance of our operations inÂ South KoreaÂ needs to be urgently addressed by GM Korea and its key stakeholders,” saidÂ Barry Engle, GM executive vice president and president of GM International. “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.”
It’s possible that more cuts will follow. GM Korea, which sold 132,377 vehicles in the country last year and exports three times that number to other nations, employs about 16,000 workers. Sales fell 27 percent in 2017. Many of the company’s exports fill out the bottom rungs of GM’s North America’s product ladder, with the Chevrolet Spark, Sonic, Trax, and Buick Encore all hailing from Korean plants. Some of the product sent to overseas nations arrives in knock-down kit form, bound for local assembly plants.
“As a result of [the plant closure], GM expects to take charges of up toÂ $850 million, including approximatelyÂ $475 millionÂ of non-cash asset impairments and up toÂ $375 millionÂ of primarily employee-related cash expenses,” the company stated.
The Chevrolet Orlando, appearing for the 2011 model year, rides atop the Cruze platform and utilizes a number of engines, depending on market. From 2012 to 2014, GM Canada sold the model with a single powertrain: a direct-injection 2.4-liter four-cylinder and six-speed automatic. GM Uzbekistan announced the discontinuation of the vehicle in late January.
GM Korea also operates a Vietnamese plant in Hanoi, a relic of a joint venture started up in the Daewoo era. In that country, GM vehicles recently saw price cuts.
[Image: General Motors]