By Choi Kyong-ae
Speculation that General Motors will reduce its presence in Korea is flaring up again ahead of the planned visit of a company executive this week.
GM Executive Vice President Stefan Jacoby, who oversees GM's Consolidated International Operations (CIO) division, is coming to Seoul to attend the board meeting of GM Korea this Friday and meet local employees, the U.S. automaker's Korean unit said Tuesday.
But analysts and industry people view Jacoby's visit as part of GM's broader reorganization and streamlining efforts across the globe under the leadership of Chief Executive Mary Barra, the first female chief named in December to lead the 106-year-old global auto giant through intensifying competition.
"Korea is definitely one of the markets GM finds increasingly difficult to maintain operations due to high costs, unfavorable exchange rates and labor issues," Suh Sung-moon, an auto analyst at Korea Investment & Securities, said by telephone.
As GM has been expanding its production capacity in China in recent years, the company does not have any compelling reasons to stick to Korea as a major production base in its global strategy, the analyst said.
Since joining the Detroit-based carmaker in August, Jacoby has been visiting major markets including Korea and Australia to review local business operations, said GM Korea, which is 77 percent owned by GM.
GM Korea union spokesman Yun Yong-shin said they will ask Jacoby to provide self-help programs that will allow the company to maintain current production volumes in Korea instead of cutting the workforce.
Talk about GM possibly walking out of Korea gained momentum in December when the company announced it was halting all production in Australia due to rising costs and weak local demand.
In the same month, GM also said it will stop selling Chevrolet-branded vehicles in Europe starting from 2016 due to lower demand for Chevy models and steepening losses. The decision is expected to deal a heavy blow to GM Korea, which exported 19 percent of its total shipments of 629,478 vehicles last year to Europe.
In 2012, exports to Europe accounted for 28 percent of the overall shipment of 654,000 autos, according to the company.
The planned pullout of the Chevy brand from Europe will result in lower production at GM's Korean output facilities by as much as 20 percent by 2016. Currently, nine out of 10 Chevy-branded cars now sold in Europe are built in Korea.
GM Korea runs three plants in Buyeong, Gunsan and Changwon, whose combined output capacity is 830,000. The company sold 780,518 cars for the whole of 2013, down 3.9 percent from a year earlier. Eight out of 10 vehicles it built were shipped overseas last year.
In seemingly preemptive measures to cushion the impact from the upcoming output reduction, GM Korea offered an additional voluntary retirement program for 6,000 office workers, Friday. It is the fourth time the 17,000-member company has cut its workforce since its foundation in 2002.
Joining GM, Ford Motor and Toyota Motor have also announced plans to withdraw from Australia as the stronger local currency has squeezed export margins.
"For GM, Korea is becoming less attractive as it is a small market with domestic demand of 1.5 million vehicles and with militant unions. It is not different from Australia. GM has said rising labor costs and currency volatility are major obstacles to its investment in Korea," Suh said.
"Things took a turn for the worse in terms of costs and exchange rates in the past year."
GM Korea is currently in multiple legal disputes with current and former employees over the issue of whether to include bonus pay as ordinary wages. A recent court decision upheld the labor side in a similar case, posing a threat to the company.
Worse still, the won continues to rise against the yen, giving a boost to Japanese carmakers and dealing a blow to Korean rivals overseas in terms of prices.
Speculation that General Motors will reduce its presence in Korea is flaring up again ahead of the planned visit of a company executive this week.
GM Executive Vice President Stefan Jacoby, who oversees GM's Consolidated International Operations (CIO) division, is coming to Seoul to attend the board meeting of GM Korea this Friday and meet local employees, the U.S. automaker's Korean unit said Tuesday.
But analysts and industry people view Jacoby's visit as part of GM's broader reorganization and streamlining efforts across the globe under the leadership of Chief Executive Mary Barra, the first female chief named in December to lead the 106-year-old global auto giant through intensifying competition.
"Korea is definitely one of the markets GM finds increasingly difficult to maintain operations due to high costs, unfavorable exchange rates and labor issues," Suh Sung-moon, an auto analyst at Korea Investment & Securities, said by telephone.
As GM has been expanding its production capacity in China in recent years, the company does not have any compelling reasons to stick to Korea as a major production base in its global strategy, the analyst said.
Since joining the Detroit-based carmaker in August, Jacoby has been visiting major markets including Korea and Australia to review local business operations, said GM Korea, which is 77 percent owned by GM.
GM Korea union spokesman Yun Yong-shin said they will ask Jacoby to provide self-help programs that will allow the company to maintain current production volumes in Korea instead of cutting the workforce.
Talk about GM possibly walking out of Korea gained momentum in December when the company announced it was halting all production in Australia due to rising costs and weak local demand.
In the same month, GM also said it will stop selling Chevrolet-branded vehicles in Europe starting from 2016 due to lower demand for Chevy models and steepening losses. The decision is expected to deal a heavy blow to GM Korea, which exported 19 percent of its total shipments of 629,478 vehicles last year to Europe.
In 2012, exports to Europe accounted for 28 percent of the overall shipment of 654,000 autos, according to the company.
The planned pullout of the Chevy brand from Europe will result in lower production at GM's Korean output facilities by as much as 20 percent by 2016. Currently, nine out of 10 Chevy-branded cars now sold in Europe are built in Korea.
GM Korea runs three plants in Buyeong, Gunsan and Changwon, whose combined output capacity is 830,000. The company sold 780,518 cars for the whole of 2013, down 3.9 percent from a year earlier. Eight out of 10 vehicles it built were shipped overseas last year.
In seemingly preemptive measures to cushion the impact from the upcoming output reduction, GM Korea offered an additional voluntary retirement program for 6,000 office workers, Friday. It is the fourth time the 17,000-member company has cut its workforce since its foundation in 2002.
Joining GM, Ford Motor and Toyota Motor have also announced plans to withdraw from Australia as the stronger local currency has squeezed export margins.
"For GM, Korea is becoming less attractive as it is a small market with domestic demand of 1.5 million vehicles and with militant unions. It is not different from Australia. GM has said rising labor costs and currency volatility are major obstacles to its investment in Korea," Suh said.
"Things took a turn for the worse in terms of costs and exchange rates in the past year."
GM Korea is currently in multiple legal disputes with current and former employees over the issue of whether to include bonus pay as ordinary wages. A recent court decision upheld the labor side in a similar case, posing a threat to the company.
Worse still, the won continues to rise against the yen, giving a boost to Japanese carmakers and dealing a blow to Korean rivals overseas in terms of prices.
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