Monday, 23 July, 2018

General Motors Company To Take $850M Charge With Closing of Korean Plant

2018 GM Korea workers hold a gathering to protest GM's decision to shut down the Gunsan plant by May 2018 GM Korea workers hold a gathering to protest GM's decision to shut down the Gunsan plant by May
Nellie Chapman | 16 February, 2018, 04:53

During a meeting with lawmakers, President Donald Trump noted GM's announcement that it will close its plant in Gunsan, South Korea, by the end of May, later adding that "already General Motors is coming back into Detroit".

The move is the first concrete action that points to GM's speculated upon withdrawal from the country.

U.S. President Donald Trump on Tuesday used a decision by General Motors Co GM.N to close one of its four plants in South Korea to launch fresh criticism of the U.S.

The Gunsan plant makes the Chevrolet Cruze compact auto and Chevy Orlando sport utility vehicle.

Auto exports dropped significantly a year ago, down 3.5 percent from 2016, with around 2.53 million vehicles shipped overseas.

GM would take charges against profits of $850-million to reflect the South Korean restructuring costs, including $375-million in cash related to employee expenses, the company said in a statement. "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", GM Executive Vice President Barry Engle said in the statement.

The GM deadline of the end of this month was seen as an "ultimatum" posed to the Moon administration ahead of the local elections in June, when jobs and wage issues will likely become sensitive political agenda. If GM pulls out of the country, it could hurt the wider local economy, as its businesses involve thousands of subcontractors and partners.

The U.S. company planned to restructure some 2,000 employees, including irregular workers, without elaborating on it. The government will continue talks with the USA carmaker to normalize its business here, considering "the impact on jobs and the regional economy".

The government plans to continuously consult with GM on ways to normalize GM Korea's business operations, considering the impact on jobs and the local economy.

The government may have to comprehensively review the carmaker's request to support its business, after GM comes up with a fresh investment plan for its South Korean unit, Industry Minister Paik Un-gyu told reporters in the afternoon.

According to data from the Korea Automobile Manufacturers Association (KAICA), the number of cars sold in South Korea previous year was estimated at around 1.56 million units, down 2.5 percent from 2016.

The White House did not immediately provide clarification on whether Trump had been told by GM that vehicle production would be moved from South Korea to Detroit.

GM stated the timing for an important plan by February is not about the United States carmaker pulling out of the country. A decision regarding the future of GM Korea is expected within the week. The business exported Chevrolet cars to Europe before GM killed the Chevy brand in that market in 2013, putting a strain on the Korean operations.

GM Korea posted combined losses of 1.95 trillion won ($1.8 billion) in the three years through 2016, according to its regulatory filings.