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GM Korea Cutting Back on Production in S. Korea
Ready for Shutdown?
GM Korea Cutting Back on Production in S. Korea
  • By Jung Min-hee
  • February 2, 2017, 02:30
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Chevrolet Orland of GM Korea, the third-largest automaker in South Korea, will be no longer produced in the country.
Chevrolet Orland of GM Korea, the third-largest automaker in South Korea, will be no longer produced in the country.

 

GM Korea recently announced that it would no longer produce the Orlando MPV, which is currently produced in its Gunsan Plant, in South Korea and would import the Chevrolet Equinox SUV instead of producing it in the country.

According to the company, the discontinuation of the production of the Orlando is because an increasing number of consumers prefer SUVs to MPVs these days and its engine and transmission have to be overhauled for the model to satisfy fuel economy regulations. The company added that it made the decision on the import of the Equinox in view of the huge investment that is required for a change in manufacturing facilities as well as cost factors.

Things are not favorable for workers in GM Korea with regard to the new Cruze as well. The production of this model recently started in South Korea but its sales volume is likely to be negatively affected by its relatively high price. The new Cruze is approximately four million won more expensive than its rival Hyundai Avante, which has a price range of 14 million won to 26.55 million won. Besides, GM Korea’s production quota for the sedan can be reduced once its sales volume falls short of expectations.

Models GM Korea launched this year or is planning to launch this year in the South Korean market are imported vehicles without exception. Examples of these include Volt PHEV, Bolt EV, Impala and Camaro SS.

GM Korea’s exports from South Korea are on the decline, too. This has to do with Chevrolet’s exit from Europe. Last month, GM Korea exported 35,199 cars, down 11.8% from a year ago. The figure for last year dropped 10% to 416,890.

Industry experts point out that the GM headquarters will continue to reduce its production in South Korea without preparing the next step of the new Malibu, which is faring well in the South Korean market nowadays. GM Korea has accounted for one-fifth of the global total production of GM and acted as its relatively inexpensive export base. However, GM Korea’s labor costs increased more than 50% during the past five years to affect is competitiveness.

“The ban on the sale of the GM Korea shares of the Korea Development Bank comes to an end this year and then nothing can stop the shutdown of GM Korea once GM USA acquires the shares,” said an industry source, adding, “Then, GM’s employment and production in South Korea can be completely replaced with the sale of imported cars.”