General Motors (GM) Korea Co. has announced that it will cease production and close its Gunsan, South Korea, plant by the end of May 2018. The Gunsan facility has been increasingly underutilized, running at about 20 percent of capacity over the past three years, making continued operations unsustainable.
GM said this announcement occurs after a careful review of the company’s operations, which have sustained significant losses for the past several years.
“This is a necessary but difficult first step in our efforts to restructure our operations in South Korea. We recognize the contribution and support of our employees, the wider Gunsan and Jeonbuk communities and government leaders, particularly through the most recent difficult period,” said Kaher Kazem, president and CEO of GM Korea. “We are committed to supporting all of our affected employees through this transition.”
GM has been aggressively addressing underperforming businesses globally, and is now focused on finding a solution for its South Korean operations.
The company has proposed to its key stakeholders a concrete plan to stay in the country and turn the business around that requires the full support of all parties — including its labor union, the South Korean Government and key GM Korea shareholders. The proposal includes significant product-related investments in South Korea and would preserve thousands of jobs.
“The performance of our operations in South Korea needs to be urgently addressed by GM Korea and its key stakeholders. As we are at a critical juncture of needing to make product allocation decisions, the ongoing discussions must demonstrate significant progress by the end of February, when GM will make important decisions on next steps,” said Barry Engle, GM executive vice president and president of GM International.
As a result of this action, GM expects to take charges of up to $850 million, including approximately $475 million of non-cash asset impairments and up to $375 million of primarily employee-related cash expenses. Substantially all of these charges will be recorded by the end of the second quarter of 2018, and will be treated as special and excluded from the company’s EBIT-adjusted and EPS-diluted-adjusted results.
Based in Incheon, Korea, GM Korea has made significant contributions to the Korean economy and automotive industry over the past 16 years, producing 10 million vehicles since its establishment in 2002. GM Korea supports approximately 200,000 direct and indirect Korean jobs. In 2017, GM Korea sold 132,377 units in Korea and exported 392,170 vehicles to 120 markets around the world. Additional information on GM Korea and its products can be found at gm-korea.co.kr.