Desperate to Regain Growth Momentum
GM Korea is seeking to regain growth momemtum by producing a new small sport utility vehicle (SUV). This move is in line with the automaker’s management normalization plan announced in May. The company is investing in Bupyeong Plant to turn it into a small SUV production base. When the facility investment is completed by the end of this year, GM Korea will begin to turn out small SUVs in Korea while importing mid- to large-sized SUVs from abroad.
According to the automobile industry, GM Korea began to invest in facilities to reorganize its Bupyeong Plants 1 and 2 in August. GM Korea agreed to normalize its operations in May. According to the normalization plan, a total of 7.7 trillion won will be injected into GM Korea. The GM headquarters in the U.S. and the Korea Development Bank promised to pour 6.9 trillion won and 800 billion won, respectively, into the company. At the time of the agreement, the GM headquarters decided to allocate production of one new SUV and one crossover utility vehicle (CUV) to GM Korea. Hence, GM Korea plans to invest about 56 billion won by the end of this year to reorganize Bupyeong Plants 1 and 2 to produce the new SUV beginning next year.
This time, the investment will concentrate on Bupyeong Plant 2. The plant produces the mid-sized sedan Malibu, the subcompact model Aveo and the mid-sized SUV Captiva. Among them, the Captiva is discontinued, and the Aveo has recorded a small sales volume. Therefore, production volume dropped, reducing employees’ working hours. The two-shift work system at GM Korea changed to the one-shift system and temps are worrying about losing their jobs.
GM Korea is changing its Captiva production line at the second plant into one for the new SUV. The new SUV is a successor to the small-sized SUV Trax, GM Korea’s flagship model for the Korean and overseas markets. Accordingly, the Trax production line in Plant 1 is also changing equipment to produce the new model.
When the investment is completed by the end of this year, Plant 2 will accumulate experience in producing small SUVs by producing the Trax along with Plant 1 and produce the new small SUV in earnest next year. GM Korea expects to produce about 75,000 additional units at Bupyeong Plant 2 when the new compact SUV is launched. GM Korea’s annual production capacity of about 130,000 units of small SUVs will elevate the carmaker’s utilization rate to 76%, addressing its serious job insecurity issue.
Once the facility investment in BupyungPlants is completed, big momentum will be given to GM Korea’s plan to become an SUV industry leader laid out by the carmaker after its declaration of the start of management normalization. This is because GM Korea has a system to produce small SUVs in Korea and import mid- to large-sized SUVs. “We will raise the proportion of SUVs which account for 10% of our total sales to 63% within the next five years,” said GM Korea president Kaher Kazem at the Busan International Motor Show in June. Starting with the mid-sized SUV Equinox released this year, GM Korea plans to launch the large-sized SUV Traverse in the first half of next year and the next small SUV in the second half of next year. The carmaker is also considering launching the pickup truck Colorado in Korea.
In 2020,the mid-sized SUV Blazer is expected to make its debut in Korea and a CUV model to be produced at Changwon Plant will be launched in 2022. Some experts say that GM Korea will launch the full-size SUV Tahoe in the Korean market in 2021. In a nutshell, GM Korea is aiming to grow into an SUV powerhouse with models ranging from a CUV to a full-size SUV."The investment in Bupyeong Plant shows our strong commitment to implementing the management normalization plan eyeing Korea as a production base," a GM Korea representative said.“This year, we will focus on facility investment and social contribution, and accelerate a recovery in theKorean market with strategic vehicles next year."