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 — an effort that led to the sale of its European Opel and Vauxhall brands last year — 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 in South Korea needs to be urgently addressed by GM Korea and its key stakeholders,” said 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 to $850 million, including approximately $475 million of non-cash asset impairments and up to $375 million 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]
They could have run ads with Tony Orlando and marketed the Orlando to Baby Boomers. “My Engine Knocked Three Times”
I was trying to come up with a Tony Orlando joke as I read the article, only to see that it has been taken care of in the first comment.
I’m glad I’m not the only old timer here who remembers Tony Orlando.
“Sales fell 27 percent in 2017.”
So nobody wants lo-po-no-go Daewoos? Say it ain’t so.
“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.”
Bottom rung. Brings down whatever brand equity is left for both marques.
Just drop a turbo 4 and AWD in there and I’m sure they’ll sell like hotcakes!
Just ask Norm.
48 MPG, 0-60 in 3.9 sec.
Problem for GM Korea aside from the high wages and unfavorable exchange rate is that most of the Korean Chevy lineup is uninspiring.
Not surprisingly, the models that sell well are the Malibu and Impala (the one market where the Impala is exported).
The Bolt was sold out for 2017 as well.
GM should have closed its plants in China instead, and pulled out of its joint ventures there. Just like with Europe, GM picked the wrong market to reduce its presence in.
GM sold over 4 million vehicles in China in 2017. Why would they not focus on their biggest market? Should they be throwing more good money after bad trying to prop up a money loser like Opel/Vauxhall?
GM could choose to reestablish itself in China once the country removes the joint venture requirement for automakers, and implements and enforces intellectual property rights. Until that happens, GM should consider being represented in China as such a HUGE risk that it’s not worth the short term financial rewards. (And that goes for all foreign automakers in China, not only GM.)
Of course it’s worth it. Nearly every non-Chinese auto maker on the planet has decided that it’s worth getting into the world’s biggest auto market. JVs may be an albatross around their necks, but no one is turning their backs on those profits.
It’s worth it in the short term only, at the expense of the long term. Unfortunately, short term thinking rules the day, hence the presence of way too many non-Chinese automakers in China. It will be their undoing, mark my words.
Well you could say the same thing about every industry building things in China. If the Chinese can’t steal your tech, they’ll just steal someone else’s to build copycat products that might one day be competitive. Might as well cash in while you can.
One of my co-workers had an Orlando on a 4 year lease. When we went on ‘day trips’ to visit other facilities it was our ride of choice. A quite decent package.
He preferred it to the GM mini-van that preceded it and the Equinox that has replaced it.
Interesting that you mentioned GM Uzbekistan.
That is a weird part of GM. They still make the first generation Daewoo Lacetti.
They sell the Lacetti under the Ravon brand after GM left the russian market.
Not sure how they sell it in Uzbekistan since it appears they haven’t left that market as they did with Russia.
GM pulled most of its vehicles out of Russia, and shutdown Assembly plant in St. Petersburg. Cadillacs, Corvettes, Camaros and Tahoes are still sold there.
Last year: 1300 Cadillacs,32,000 Chevys and 15,000 Ravons were sold in Russia.
From Uzbekistan GM also exports vehicles to western China.
Peter, I am aware they still sell a few. Mostly the “fancy” models and not the plebeian stuff they used to sell as well.
The Cruze and the Aveo (sonic) was super popular in Russia. You used to see them everywhere.
My Uncle-in-law in fact was a Aveo owner himself though he has since sold it. Not sure what he is driving these days.
Still not sure why they couldn’t make it work. I was really looking forward to the new Niva concept.
Ah well for what its worth the Russian economy is growing again. Hopefully it will get back on track. Its been a rough couple years for car sales.
Huh. Another car sold in Canada you can’t buy in the US. Never knew that.
The Orlando… One of the reasons the Toronto Star dropped Jeremy Clarkson’s review column.