The home of America’s smallest General Motors vehicles is bleeding sales and cash, forcing the automaker into harsh measures in an attempt to save its South Korean operation. Many fear last week’s plant closure announcement is just the beginning of an eventual exodus from the Korean market. There’s three remaining assembly plants, each sitting on shaky financial ground.
Today brings encouraging news, however. Two reports paint a picture of GM in triage mode, doing everything in its power to stem the bleeding â€” of both money and customers.
According to Reuters, a South Korean lawmaker claims GM International president Barry Engle promised members of parliament two new vehicles in a Tuesday morning meeting. South Korea owns a 17-percent stake in GM Korea, and it isn’t clear whether the product promise hinges on government support.
With 2,000 jobs already in jeopardy at GM’s soon-to-be shuttered Gunsan plant, and worker unrest growing, government intervention seems inescapable. On Monday, Reuters reports, South Korean President Moon Jae-in told his administration to assist in economic development efforts in the manufacturing region surrounding the plant.
Moon said the government will “aggressively” pursue these measures, which may include designating Gunsan as an “employment crisis area.” Such a label would allow for cheap business loans and support for laid-off workers.
On Tuesday morning, another Reuters report, citing four sources close to the matter, claimed GM plans to erase $2.2 billion in debt by converting it to equity. This would be done in exchange for “financial support” and tax benefits from Seoul. One source says GM wants $1 billion in support from South Korea, while another claims GM demanded its factory sites be labelled “foreign investment zones,” thus making them eligible for tax breaks for a period of seven years.
Though GM Korea’s domestic sales have fallen severely, it still exports vehicles to markets around the world, including North America. In his meeting with lawmakers, Engle said he’d like to see production continue at its current rate (roughly half a million vehicles per year). The Chevrolet Spark, Sonic, Trax, and Buick Encore all hail from South Korean plants.
[Image: General Motors]