In 2005, GM Korea manufactured 1.15 million vehicles, but production decreased sharply to 630,000 units in 2014. (image: GM Korea)
SEOUL, May 7 (Korea Bizwire) – Against the backdrop of a Reuters’ interview with General Motor’s top executive hinting that the Detroit-based automaker might relocate its Asian production base from Korea to India, officials from GM Korea say that the likelihood of a move is low, but they are paying close attention to the situation.
On May 3, Reuters reported comments from Stefan Jacoby, GM’s chief of international operations, saying that the automaker would make India a new global manufacturing and export hub, taking some of the strain off South Korea, where labor costs have ballooned in recent years.
In his interview with Reuters, Jacoby said, “We have no concrete plans to close factories in South Korea, but, to remain competitive, GM Korea must find ways to drive efficiencies over time. The power of the labor unions is a huge challenge for GM.”
In the meantime, he said “India has gained back confidence, especially after Modi’s election. We see growth potential in India and there’s more prosperity and buying power.”
Following Jacoby’s remarks, officials at GM Korea have maintained that the probability of GM relocating its Asian production base to India is low. However, they acknowledged his points related to ballooning labor costs and weakened competitiveness.
Sergio Rocha, president and CEO of GM Korea, denied the India relocation rumor. However, he said, “We worry about labor costs. In Korea, labor costs increased 50 percent over the past five years, which has weakened the competitiveness of the Korean auto industry.”
An official at GM Korea’s Bupyeong plant said, “GM strategically varies its production line-up based on the country. It is true that India’s auto market is prosperous, but it is not realistic for India to take over all of Korea’s production.”
In 2005, GM Korea manufactured 1.15 million vehicles, but production decreased sharply to 630,000 units in 2014. According to IHS, GM Korea is expected to produce 365,000 units in 2025.
“In the eyes of foreign auto manufacturers, it is obvious that Korea is losing its attraction as a production base, and without any special changes, rumors of this sort will materialize periodically,” an industry observer said.
By John Choi (johnchoi@koreabizwire.com)
