South Korea is looking at various options for the South Korean unit of US-based automaker General Motor, as market rumors swirl over the carmaker‘s potential pullout, the country’s finance minister said on Feb. 9.
GM Korea has been struggling with falling sales and a mounting deficit amid rising costs, which market watchers say could prod GM to consider withdrawing its Korean operations.
“We are preparing for various possibilities,” Finance Minister Kim Dong-yeon said during a parliamentary inquiry. It is feared that GM‘s pullout will lead to massive layoffs and hit the local economy.
Earlier this week, GM CEO Mary Barra said the Korean unit must take steps to be “viable.” Referring to GM Korea, Barra said, “We’re going to have to take actions going forward to have a viable business.”
Over the past three years, GM has scaled down or shut down businesses in markets such as Russia, India and Indonesia due to poor performance. Last year, the Detroit-based carmaker sold its German unit Opel and UK brand Vauxhall to France‘s PSA Group for $2.3 billion.
GM executives have pointed to high manufacturing costs and weak sales of its vehicles in Korea as major obstacles to a continuing business presence here.
In 2017, GM Korea saw its overall sales slump 12 percent, falling to 524,547 vehicles from 597,165 units a year earlier. In January, its sales fell 9.5 percent on-year to 42,402 from 46,842.
South Korean state-run policy lender Korea Development Bank holds a 17 percent stake in GM Korea, while GM has 77 percent.
Market rumors have it that GM wants financial support from the South Korean side, and capital increase could be one option for the Korean unit of GM.
By Song Seung-hyun and newswires (email@example.com