A mounting crisis is facing GM Korea suffering from severely sluggish sales. A possibility of a decline in exports to Europe and sluggish new car sales among others are once again fueling a rumor about GM Korea's withdrawal from the Korean market which once subsided since new president Kaher Kazem, took office in September.
The crisis began when the Peugeot Citroen Group (PSA) announced on November 9 that the company decided to produce small-sized sports utility vehicles (SUVs), which had been imported from GM Korea, directly at European plants of Opel, a subsidiary of the PSA in order to boost Opel’s productivity. The production’s specific time and scale were not mentioned. The PSA acquired Opel which was GM's European subsidiary earlier this year. When reaching the sale agreement, both agreed to maintain volume from GM Korea for the time being but the situation has changed.
In no time, GM Korea was put on alert. GM Korea exported 130,000 units through Opel last year alone. The volume accounted of 22% of Korea GM's annual sales (597,165 units) last year. "The change will prune the operation rate of GM Korea’s plants in Korea and eventually lead the automaker to a restructuring," said an official of the automobile industry.
In the Korean market, GM Korea's crisis is deepening. GM Korea's domestic sales in the first ten months of this year fell 11% to 110,176 units from 144,726 units in the same period of last year. In order to overcome this situation, GM Korea launched an All-New Cruz diesel model on November 1 but the new model was not well received in the market due to its high price.