Posted : 2017-10-27 14:19
Updated : 2017-10-27 19:03

Does GM cheat South Korea?

GM Korea CEO Kaher Kazem swears in as a witness during a National Assembly audit of the Korea Development Bank, Monday. / Yonhap

US carmaker under fire for ‘dubious strategy'

By Park Jae-hyuk

Growing concerns over an abrupt withdrawal of General Motors (GM) from Korea have been used as a diplomatic tool by the United Sates which is seeking an advantage in renegotiations of a free trade agreement with Korea, an expert in the auto industry told The Korea Times, Friday.

Automotive engineering professor Kim Phil-soo at Daelim University said the U.S. carmaker appears to be spreading the rumor to press the Korean government to ease regulations on emission and safety.

"GM will not leave Korea soon," he said. "Even if it decides to exit here, it will take at least five years."

U.S. automotive companies have continued to demand the Korean government ease regulations.

This is because they must conduct additional developments to export their cars to Korea.

When GM's Damas and Labo failed to meet local standards in 2013, the company threatened the government by suspending the production of the cars.

The government postponed the implementation of regulation to 2020 at that time.

The professor regarded GM Korea's dubious attitude these days as another threat to the government.

GM Korea CEO Kaher Kazem, who led the restructuring of GM India, avoided answering the question about the carmaker's withdrawal asked by Rep. Ji Sang-wuk of the minor opposition Bareun Party at a National Assembly audit this week.

The chief executive just repeatedly said his company's executives and employees were doing their best to normalize operations and to develop a sustainable business model in the country.

GM Korea has suffered nearly 2 trillion won ($1.7 billion won) in accumulated losses over the past three years.

Its headquarters have recently halted production in Australia, Europe, Indonesia, Thailand, Russia and India.

Kim expects GM will threat the government by closing or selling its factory in Gunsan, North Jeolla Province, instead of completely leaving the Korean market, one of the company's largest production bases around the world.

"GM will likely dispose of the factory around the middle of November, after the National Assembly audit and the Korea-U.S. summit," he said. "Fostering Shanghai GM, it will seek for efficiency in the Asian market."

The factory, which has produced the Chevrolet Cruze and Orlando, is one GM Korea's main manufacturing plants along with its Bupyeong factory in Incheon and Changwon factory in South Gyeongsang Province.

However, hundreds of irregular workers at Gusan factory recently lost their jobs, amid the factory's low rate of operation. The expected closure of the factory will deal a severe blow to the city, which has already suffered from shutdown of a shipyard by Hyundai Heavy Industries.

Although the government ordered a state-run research institute to establish countermeasures, Kim said the government will not be able to take any because the Korea Development Bank (KDB) lost veto control of the company this month.

The KDB, which is the second-largest shareholder of GM Korea with a 17.02 percent stake, said its right to veto the top shareholder's decisions expired Oct. 16. GM head office holds a 76.69 percent share of the Incheon-based automaker.

The 15-year-old veto right had been an instrument to discourage drastic measures by GM's head office. Without the KDB's veto right, however, GM has no legal restraints in coming up with any steps.

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