SEOUL, May 31 (Korea Bizwire) — General Motors Co., the parent company of GM Korea Co., on Thursday shut down one of its plants in South Korea as it moves to restructure its operations at home and abroad.
The 260,000-unit-a-year plant in Gunsan, about 270 kilometers southeast of Seoul, was hit hard by GM’s decision to withdraw its Chevrolet brand from Europe in 2013. Its utilization rate plunged to a dismal 20 percent from 2016 amid rising labor costs.
In February, the Detroit-based carmaker announced its plan to shut down one of its four car assembly plants in Korea by May and asked the state-run Korea Development Bank (KDB) to extend a financial helping hand to the loss-making GM Korea.
The Gunsan plant, which opened 22 years ago, has stopped production of two Chevrolet models, the Orlando SUV and the Cruze compact, though GM Korea will continue to sell cars in its inventory in the domestic market.
There remains some 680 workers at the Gunsan plant out of its 2,000 workforce during its heyday. The company is mulling relocating 200 of them to other plants in Bupyeong, just west of Seoul, and Changwon, 400 km south of Seoul, a company spokesman said over the phone.
As for the remaining 480 workers, the government is considering paying them a maximum amount of 1.8 million won (US$1,700) in unemployment benefits per person on a monthly basis for three years. On top of this, the company and its union are in talks to provide 450,000 won a month to support these workers for three years, the spokesman said.
But the subsidy plans have yet to be approved or agreed upon by related parties, he said.
GM Korea said it has not decided yet on how it will deal with the closed Gunsan plant. There are no carmakers that have expressed an interest in acquiring the car production facilities.
As the Gunsan plant and its 135 subcontractors hired a combined 13,000 workers, or 20 percent of the port city’s overall employment, the closure is expected to have a significant impact on the regional economy.
In 2011, the Gunsan plant was responsible for a whopping 50 percent of exports shipped from the city and 30 percent of those from North Jeolla Province.
To keep the regional economy from deteriorating further, the central government needs to intervene to sell the Gunsan plant or find other ways to offer the dismissed workers opportunities to land a job, provincial government officials said.
Early this month, GM and the KDB, the two biggest shareholders in GM Korea, signed the binding agreement that will permit a combined 7.7 trillion-won lifeline — 6.9 trillion won from GM and 810 billion won from the KDB — to keep the loss-making Korean unit afloat.
GM holds a 77 percent stake in GM Korea, with the KDB and SAIC Motor Corp. controlling 17 and 6 percent, respectively.
Under the deal, GM is banned from selling any of its stake in GM Korea before 2023 and is required to keep its holding in the unit above 35 percent until 2028.
To boost lackluster sales, GM Korea plans to launch 15 new upgraded vehicles in the domestic market in the next five years. This month, the company launched the facelifted Spark minicar and plans to add the midsize Equinox SUV and the upgraded midsize Malibu sedan this year.
GM Korea continued to post net losses worth an accumulated 3.134 trillion won from 2014-2017 due to lower demand for its models.