Entering Month of Fate

GM Korea's slump in the Korean market is fatal as GM Headquarters is in the process of restructuring its global market.
GM Korea's slump in the Korean market is fatal as GM Headquarters is in the process of restructuring its global market.

 

Last month, GM Korea sold 8,991 cars in the domestic market and was relegated by Ssangyong Motors for the first time since its foundation. GM Korea failed to sell 9,000 or more cars in Korea in five years and eight months since January 2012. Moreover, as the equity sale rejection right held by the Korea Development Bank (KDB), the second largest shareholder of GM Korea, will expire on October 17 and GM Headquarters began to change its global market early this month, a lot of attention is being to GM Korea’s fate.

GM Korea said on October 10 that the automaker sold 8,991 cars in the domestic market last month. The figure was 36.1 percent down from last year's sales of 14,078 units. GM Korea's domestic sales fell to below 9,000 units in 68 months since January of 2012 when the company sold 8,041 units. Given the fact that the domestic sales of five automakers in the same period grew by 20% compared to the same period last year, it is a terrible result.

The first reason why GM Korea received a poor report card is a lack of a competitive new model. New offensives with new models by GM Korea’s competitors led the market to classify current GM Korea models such as the Spark and the Malibu into old models that failed to draw attention from consumers.

Analysts say that GM Korea's slump in the Korean market is even more fatal as GM Headquarters is in the process of restructuring its global market. GM merged its overseas operations (GM International) with the South American business division on October 4 (local time) and appointed Barry Engle as general manager. As a result, GM's global operations have been simplified into three divisions -- North America, China, and other countries -- from four -- North America, China, South America and other countries. “GM calls the merger between the overseas operations (GM International) and the South American business division market integration. But the market integration virtually dismantled GM International which included GM Korea," an automotive industry expert said. “The status of GM Korea may fall with the dismantlement of GM International.”

GM restructured its operations in Europe, India and South Africa this year. It is said that GM is planning to downsize GM Korea.

In addition, when the KDB’s veto right is invalidated on October 17, the bank will lose its control over GM's sale of its stake in GM Korea.

"The KDB, the second largest shareholder of GM Korea, has kept the veto right since 2002. The veto right has been the foundation for preventing GM Korea from arbitrarily withdrawing from Korea. Some raised a possibility that GM will begin to restructure GM Korea on a full scale when the right expires on October 17,  

GM Korea is planning to break through crisis rumors under the leadership of new president Kaher Kazem appointed last month. "President Kazem is a personnel management expert. He will be able to come up with rational solutions to labor-management relationships considered GM Korea’s Achilles’ heel," a GM Korea official said. To top it off, GM Korea is planning to overcome its sluggish domestic sales by means of launches of many new models including the Cruze diesel-powered model and the development of attractive promotion programs this year.




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