UPDATE : 2019.4.25 THU 10:26
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GM hopes to maintain 500,000 unit capacity in S. Korea

General Motors Co. will decide next month whether to maintain a production capacity of 500,000 units in its plants in South Korea by allocating two new vehicles here, an executive from the U.S. carmaker said Tuesday.

Following a meeting with South Korean lawmakers at the National Assembly in Seoul, GM Executive Vice President Barry Engle told reporters, "It is our preference to stay here in Korea and to fix the business and make it a healthy environment. In order to do that, there is a turnaround plan that we have developed. That plan includes significant investments and new products."

The turnaround plan also includes restructuring activities that require "cooperation and helpful support" from all of the stakeholders in GM Korea Co., he said.

In this photo taken on Feb. 20, 2018, GM Executive Vice President Barry Engle (R) and GM Korea President and CEO Kaher Kazem prepare for a meeting with South Korean lawmakers at the National Assembly in Seoul Tuesday morning to discuss ways to revive GM's South Korean operations. (Yonhap)

As for GM's long-term plan to turn its Korean business around, Engle said the Detroit-based carmaker may consider allocating two new vehicles to its plants in Bupyeong, just west of Seoul, and Changwon, 340 kilometers south of the capital city, so as to maintain sufficient annual production volume.

But he didn't say if GM may consider allocating the new car models here on the condition that the Seoul government extends a helping hand to its loss-making Korean unit.

With regard to new models, industry sources here said securing meaningful production volume will be a critical factor in GM's continuing presence in the country.

Last week, GM announced it will shut down the 260,000-unit-a-year Gunsan plant, 270 km south of Seoul, by the end of May as it has been seriously underutilized in past years. The move is part of the U.S. carmaker's global restructuring efforts.

In 2017, GM Korea produced a total of 520,000 vehicles at all its car assembly plants, which have a combined capacity of 910,000 units.

The carmaker said it will decide the future of the remaining plants in South Korea within weeks based on discussions with the Seoul government and GM Korea's labor union. This move sparked strong resistance from the union and GM Korea's subcontractors due to what are expected to be massive job cuts.

The state-run Korea Development Bank owns a 17 percent stake in GM Korea, with GM and SAIC Motor Corp Inc. controlling 77 percent and 6 percent, respectively.

"To secure an output volume of new vehicles that will keep GM's remaining plants in Korea operational, the company's union is required to accept a steep reduction in wages, bonuses and welfare benefits, among other things," an industry official said.

GM is expected to commit to product allocation in Korea if the Seoul government and its 13,000-strong union outline aggressive self-help efforts.

"The performance of our operations in South Korea needs to be urgently addressed by GM Korea and its key stakeholders," Engle said in a statement released last week.

"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," he said.

GM confirmed it recently asked for full-scale cooperation from all of its stakeholders.

"We are asking our union to also help and to contribute, and the government as well," Engle said Tuesday, adding that there will be a more appropriate time later to talk about discussions with the government since the details are private right now.

Asked if GM may consider a withdrawal from Korea if no support is forthcoming, the executive said, "There is a lot of work to do to make that happen, but I am very encouraged by the discussions and optimistic."

But the Seoul government and the KDB are not likely to accept GM's stance without conditions of its own, as it would be required to use taxpayers' money. The policy lender wants GM to specify its investment plans in its Korean unit.

Finance Minister Kim Dong-yeon said the government will review GM's rehabilitation plan before making any decisions. The rehabilitation plan indicates GM's possible allocation of two new cars to Korea.

"We are ready to discuss the normalization of GM Korea. We have not received any official requests from GM, and it is too early to say what steps will be taken," Kim said in a media briefing.

The government will draw up a set of measures to minimize any serious fallout from the planned closure of the Gunsan plant, he said.

Over the past four years, GM Korea posted up to 3 trillion won (US$2.8 billion) in estimated net losses, but the company has paid more than 10 million won per worker in bonuses each year.

For its long-term presence in Korea, GM claimed it will spend up to $850 million this year, including approximately $475 million in non-cash impairments and $375 million in employee-related cash expenses.

For the whole of 2017, GM Korea saw its combined sales slump 12 percent on-year to 524,547 vehicles from 597,165.

Meanwhile, the government on Tuesday designated the city of Gunsan as a "special crisis zone" for industry and employment. In designated crisis zones, the government provides assistance in the form of low-rate loans, with other support being made available to companies and to workers forced out of their jobs. (Yonhap)

Kim Sua  edt@koreapost.com

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