[THE INVESTOR] GM International President Barry Engle is likely to announce a reduction of its Changwon plant operations during his planned visit this week, according to industry sources.
On March 2, GM finished accepting voluntary retirement applications. Around 2,500 GM Korea employees signed up for voluntary retirement, which will save the carmaker up to 400 billion won (US$370 million). Since its annual average loss over the past four years is 750 billion won, GM Korea has to find ways to cut an additional 350 billion won.
GM International President Barry Engle
“Engle might not directly mention the reduction plans due to the current public sentiments, but he will definitely mention that if the productivity of Changwon factory does not show any improvement, GM will have to consider reductions,” said Lee Ho-geun, a professor of automotive engineering at Daeduk University.
GM produces the Spark city car, and the Damas and Labo models at the Changwon factory. Their sales fell by 40 percent to 150,000 this year, compared to four years ago.
Productivity levels aren’t too high either. In the beginning of February, GM’s Changwon factory failed to get its Built In Quality Level IV certificate due to poor efficiency. This was in contrast to the Gunsan plant, which was selected to be shut down by May, managed to get a certificate.
The only way to improve the Changwon plant is to be assigned a new car model, according to experts.
Engle said GM Korea will consider producing two new cars at Bupyeong and Changwon when he last attended the parliamentary briefing in Korea. But he also stressed that productivity improvement is a precondition.
The ongoing wage talks are another crucial factor affecting the headquarters’ decisions about a new model assignment, but as of Feb. 28, the GM Korea union representatives were unable to reach a consensus with the management.
By Song Seung-hyun (email@example.com)