US auto tariff threat stokes fears over GM Korea's possible exit
The entrance of GM Korea's plant in Incheon is shown, April 1. Yonhap
The United States' plan to impose 25 percent tariffs on imported automobiles starting this week has ignited concerns over the long-term stability of GM Korea, the Korean unit of General Motors (GM), raising the possibility of its potential withdrawal from Korea, industry observers noted Wednesday.
GM's headquarters has indicated it is closely monitoring the tariff developments and could consider options, such as shifting production locations, if the U.S. trade barriers persist.
The company's history of exits from markets with rising costs — including Australia, Indonesia, Thailand and India — has prompted industry observers to take such indications seriously.
GM Korea was founded in 2002 when the U.S. automaker bought a majority stake in then troubled Daewoo Motor and launched a new carmaker, GM Daewoo Auto & Technology. It was renamed GM Korea in 2011.
The company has two plants in Incheon, west of Seoul, and Changwon, about 300 kilometers east of the capital, as well as a research and development subsidiary, which together employ around 11,000 workers.
GM previously shut down its Gunsan plant in Korea in 2019 over profitability issues.
The company's heavy reliance on the U.S. market adds to the sense of vulnerability. GM Korea exports approximately 410,000 vehicles annually, with about 85 percent of those shipments headed to the U.S.
Should the U.S. tariff take effect, the company's weakened price competitiveness could make continued production in Korea less viable.
"GM Korea primarily produces two gasoline vehicle models for the U.S. market, and unlike Hyundai Motor or Kia, it lacks the same level of support at the national level," Ki Pil-soo, an automotive professor at Daelim University, said.
Kim added, "If tariffs are imposed, the company could find it difficult to justify its production operations in Korea."
Amid rising uncertainties, GM Korea's leadership and union representatives traveled to the U.S. last month to meet with executives at GM's headquarters.
Discussions reportedly focused on GM's global production road map and future vehicle plans.
The union has reportedly called for new electric vehicle (EV) production lines to be augmented at both plants in Incheon and Changwon.
Newly built vehicles are carried by a truck ready to be transported from GM Korea's plant in Incheon, April 1. Yonhap
A GM Korea representative declined to comment when asked by Yonhap News Agency on industry concerns of a possible exit.
The company, however, appears to be communicating its commitment to maintaining local operations through media events and internal meetings.
Last month, the automaker unveiled a newly opened GM service center in Seoul to the media, which was widely interpreted as an effort to reinforce its confidence in the Korean market.
In addition, Hector Villarreal, president and chief executive officer (CEO) of GM Korea, reportedly held a town hall meeting with employees earlier this week to reassure concerned workers.
At the meeting, he reportedly said GM has been evaluating various scenarios over the past several months and is actively preparing countermeasures to minimize potential disruptions.
Lee Hang-gu, a researcher at the Korea Automotive Technology Institute, noted that GM Korea has seen improved profitability despite recent reductions in production capacity, and noted that it should engage in efforts to highlight its significance in the U.S. market.
"GM Korea should persuade the headquarters and the U.S. administration so that it recognizes GM Korea's strategic value as a key supply base for compact sport utility vehicles affordable to America's middle and lower-income consumers," Lee added. (Yonhap)