By on February 19, 2018

General-Motors-Gunsan-South-Korea-Plant-Chevrolet-Cruze-Production-01-720x513

South Korean President Moon Jae-in says General Motors’ decision to shut down its Gunsan plant will negatively impact the region. He’s hoping his administration can work some impressive mojo to boost economic activity in the area, but admitted that GM’s quick exodus could make that tricky. There are also concerns that the automaker may soon decide to close down its remaining three plants within the country, leaving 16,000 South Koreans without employment.

“Especially, the decline in employment [at GM] and subcontractors will be difficult to bear for Gunsan City and North Jeolla province,” Moon said in a statement released by his office.

However, things haven’t been going well for GM in the region. The company said it shuttered the plant after it became increasingly underutilized — running at about 20 percent of its total capacity over the last three years. Meanwhile, GM President Dan Ammann claims Korean labor costs have increased by over than 50 percent since 2010. Worker productivity is also abysmal. It takes roughly three hours longer to build a single car in GM’s Korean facilities than it does in the U.S., and Korean strikes are becoming commonplace.

General Motors doesn’t want to outright abandon South Korea, but shrinking sales haven’t helped. Likewise, a lot of the product produced within the country hasn’t fared well as exports. Ultimately, the reduced profitability is what forced the decision to close the plant and may cause further cutbacks within the region.

According to Reuters, a GM Korea spokesman said Monday that the company is committed to supporting the affected workers. The U.S. automaker launched a voluntary redundancy program last week for its employees in that country. Meanwhile, workers at the Gunsan factory called the shutdown a “death sentence” and threatened to strike — not that it would make one bit of difference.

Moon requested that his government be uncompromising in its ongoing trade talks with the United States, voicing serious concerns over curbs on imports recently imposed by the nation. “Due to the expansion of U.S. import curbs on our export products like steel, electronics, solar panels and washing machines, I worry about our exports as a whole despite our international competitiveness,” Moon said. “I ask the government to act firmly and sternly to unreasonable protectionist measures, such as by lodging complaints to the World Trade Organisation and checking for violations of the U.S.-South Korea free-trade agreement.”

General Motors is expected to make a decision on its remaining factories in South Korea in the coming weeks. Whether or not it decides to close them, it has confirmed that extensive restructuring will have to take place if it is to remain in the country.

[Image: General Motors]

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21 Comments on “South Korean President Miffed Over GM Plant Closure, Fearful of the Future...”


  • avatar
    tonyola

    I bet the powers that be at GM are beginning to think that South Korea is getting too expensive for manufacture. Watch them turn their eyes to China, then Africa.

    • 0 avatar
      strafer

      If US production takes 3 hours less per car as the article stated, sounds like bringing production back to US maybe cheaper.

      • 0 avatar
        TwoBelugas

        GM Korea was doomed the moment Cruze started to be made in Mexico and Chinese built Envisions started shipping to the US.

        • 0 avatar
          bd2

          The biggest problem was the pull-out of the Chevy brand from Europe, exacerbated by the move of Mokka production from Korea to Spain (where it was cheaper to manufacture) – which resulted in tons of excess capacity (a plant operating at 80% capacity is costing an automaker $$, at 20% it’s disastrous).

          Add to that rising labor costs, the inefficiency of production at Korean plants compared to other markets (H/K also have this problem), constant work-stoppages or strikes and the high valuation of the Won and Korea is not a competitive place to build autos, much less be an export hub (presently, it’s cheaper to build in the US and even Japan).

          The Korean govt. thru the Development Bank owns a sizeable stake in GM Korea, so they want to see GM Korea stay and succeed, but the leaders of the auto union better get a grasp of reality quickly and understand that they will have to give concessions on wages/productivity if GM Korea isn’t to make further cuts or even pull out altogether (aside from keeping an R&D/design center there).

          • 0 avatar
            Peter Gazis

            bd2

            Chevy failed in Europe. Most of its vehicles went to rental fleets. and undercut Opel in price. Opel quickly picrd up those fleet sales after Chevy left.

            GM is exporting more Mokka/Trax/Emcores from South Korea than ever. 250,000 per year.

          • 0 avatar
            bd2

            @Peter

            Am well aware of why Chevy failed in Europe.

            Don’t think GM Korea is exporting more than they ever have – otherwise, the plant they are planning to close in Gunsan wouldn’t be running at 20% capacity.

            Plus, they moved Mokka production to Spain (tho still producing the Encore for the US market).

      • 0 avatar
        Ce he sin

        Better still, make them in China. Much cheaper.

  • avatar
    87 Morgan

    GM is not a jobs program. They tried that in the US awhile ago and it did not work out all that great.

    Workers are threatening to strike? WTF?

    How about threaten to do a better job, and perhaps you could retain one.

    • 0 avatar
      bd2

      Unions have their purposes, but the Korean auto unions have been entirely unreasonable in their demands.

      The other side of the coin is being a temp worker w/ unstable hours and no benefits; Toyota has quietly been increasing their reliance on temp workers in Japan to lower production costs (the weak Yen also helps).

      A good bit of light manufacturing has come back to the States from China (due to rising labor costs there and wanting to reach customers quicker), but wages are hardly better than service industry jobs (and usually w/ no benefits) and even then, industries are looking to increased automation to further reduce labor costs.

      • 0 avatar
        highdesertcat

        Well, it can be said that the UAW has been entirely unreasonable in their demands.

        But now the UAW has Carte Blanche, because…. Trump.

        Trump is a union man, pro-union and favoring more production in Homeland USA, with organized labor.

        Things changed since Nov 8, 2016. The unions will be making a comeback in America, because….. Trump.

        • 0 avatar
          dejal1

          So?

          I’m not a big union supporter but so what.

          Cheap prices for imported goods right now may be good for you, good for me, but down the road good for nobody.

          And the retail price of those imported goods aren’t all that cheap anymore.

        • 0 avatar
          bd2

          How has the UAW been “entirely unreasonable”?

          The UAW making major concessions is what allows GM to build the subcompact Sonic in Michigan (don’t know if GM is making any profit in doing so, but they are at least breaking even).

          Ford builds the Fiesta in Mexico and the Japanese also build their subcompacts for the US market there.

          In addition, the Japanese are moving or planning to move production of their compact sedans to Mexico.

          Drumpf doesn’t believe in anything but enriching himself.

          Yeah, Drumpf believes in unions so much (aside from pandering to them for votes) that he has stiffed plenty of small time contractors.

          Not only that, Drumpf imported cheap (undocumented) labor from overseas (such as from Poland) in order to avoid paying union wages.

          Those workers not only worked for sub-standard wages, they lived in horrible conditions and some even got stiffed of the wages they were supposed to get.

          Drumpf still imports cheap labor from overseas to staff his hotels and resorts.

  • avatar
    Sub-600

    President Moon Jae-in shouldn’t worry unless the U.S. Army closes in S. Korea.

  • avatar
    jpolicke

    Did South Korea believe they were somehow exempt from the laws of economics? They should have prepared better; no one forced them to spend 12.9 billion hosting the Olympics. That money could have gone a long way in unemployment benefits.

  • avatar
    stingray65

    Rapidly rising labor costs, strike-prone unproductive workforce, inflexible union facing an employer with low plant utilization and cheaper options elsewhere? Sounds vaguely familiar…

  • avatar
    Spike_in_Brisbane

    USA is becoming the cheap labor destination for the world’s manufacturers.

  • avatar
    conundrum

    GM is planning to rule the world with Wuling vans, foreign Buicks and Chev/ GMC pickups. So Daewoo is out. Buy your classic Sonic or Spark before South Korea joins Germany and the UK on the scrapheap of GM product planning.

    Cannot imagine how silver-tongued that de Nysschen guy is, still spending billions on Caddies that don’t sell. The GM board will be after him next, and the baristas in Soho will threaten a wildcat strike.

    • 0 avatar
      Peter Gazis

      Cadillac sold 356,000 vehicles worldwide last year. 156,000 of those were in the U.S. The 2 new Crossovers(XT4,XT6) and redesigned midsized sedan (CT5) will definitely boost those numbers. The new Cadillacs are being designed with RHD in mind. Getting ready for a big product push into England, Australia & Japan.

  • avatar
    agroal

    SK and NK are now BFF marching together at the Seoul Olympics. SK forgets that the only reason they can flood US markets with their economic giants like Hyundai, LG, Samsung, and Kia is because America still defends the Korean peninsula 70 years on. If SK is now OK with the recent NK ICBMs flying over their country then let’s bring the 38,000 US troops home and let them defend themselves. Ungrateful dog eaters.

    • 0 avatar
      dejal1

      Agree 100% A populace that doesn’t like us and yet we pour billions into defending them. Every time I see a anti-US protest over the years, I cringe. It’s time for them to put their big boy pants on and step-up.

      World Bank says 3.3% of GDP for defense for the US, 2.6% for S. Korea. For a country bordering a knuckle head they should be chipping in more.

      Israel spends 5.7%. Seems about right for the threats they face.

      Euro area 1.5% And they complained when Trump threatened them about NATO but call us warmongers and brag about their social programs. Easy to be generous on someone else’s dime.

    • 0 avatar
      bd2

      First off – let’s get the FACTS straight.

      SK annually pays around $800 to 900 million a yr towards the upkeep of US forces in Korea, on top of purchasing Billions of dollars of US military hardware.

      SK also paid for most of the construction and relocation costs for the new US base south of Seoul (Camp Humphreys) totaling around $9-10 billion.

      Also, the SKoreans are under no delusions that little fat boy in NK is not a danger, but at the same time, one doesn’t try to incite that danger (like what Drumpf does) and have to do things to de-escalate tension on the peninsula.

      As for view of the US, SKorea has one of the HIGHEST % of having favorable viewpoint of the US with a 75% favorable rate according to Pew Research (was higher in 2014 with an 82% favorable rating).

      That’s not only significantly higher than Japan (57%), but countries like Australia (48%), the UK (50%), Germany (36%), France (46%) or Canada (43%).

      http://www.pewresearch.org/fact-tank/2017/08/23/in-global-popularity-contest-u-s-and-china-not-russia-vie-for-first/

      People thinking they know something (when they don’t) is exactly why the country is in the shape it is today.


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