GM Korea Might Go Bankrupt

GM Korea Might Go Bankrupt 1 photo
Photo: Chevrolet
Too big to fail? The American government saved General Motors from bankruptcy. But now the Korean division is facing the same thing if both the local officials and the union agrees to its terms.
GM Korea has been running at a loss for many years and could become bankrupt by April 20th. Having already announced that it's closing one of its four factories in the country, company officials now say they need further support.

You might think that the Korean division could fall without impacting the rest of the world, but that's not the case.

When GM bought Daewoo Motors back in 2002, it gained access to their small car expertise, which directly led to the development of the Spark and Aveo. Also, the Buick Encore and Chevy Trax were developed there.

They have four factories in Gunsan, Boryeong, Changwon and Bupyeong-gu. The first is already closing down after functioning at about 20% capacity for nearly three years.

The automaker made cost cuts worth around $470 million by union concessions on wages and bonuses and voluntary redundancies, but it's still working to cut around $80 million in benefits.

Of the 16,000 people currently employed by GM Korea, about 2,500 or 15% have agreed to a redundancy package. The company might also consider more voluntary redundancies for the remaining 680 workers at its Gunsan factory.

Too big to fail?

The Korean government apparently holds the key to the survival of GM Korea, with a lot hanging in the balance. Over 10 million vehicles have been manufactured there over the past 16 years.

In 2017, internal sales reached about 132,000 units with an additional 392,000 units going to export markets. Besides the Aveo and Spark that we mentioned, Chevrolet also manufactures the slow-selling Orlando minivan, the Cruze, Trax, and Impala.

GM owns 77% of GM Korea, with Korea Development Bank owns a 17% stake, followed by Chinese joint venture partners SAIC. More importantly, about 200,000 direct and indirect jobs can be affected.
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About the author: Mihnea Radu
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Mihnea's favorite cars have already been built, the so-called modern classics from the '80s and '90s. He also loves local car culture from all over the world, so don't be surprised to see him getting excited about weird Japanese imports, low-rider VWs out of Germany, replicas from Russia or LS swaps down in Florida.
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