Key Production Base
GM Korea, which has had constant conflicts between labor and management over strategies for future development, has provided its blueprint for the future. It will maintain its role as the hub of compact car development and become the core production base for emerging markets.
According to sources in the industry on March 31, GM approved expenses of 90 billion won (US$81.08 million) needed to mass produce its new Cruze (D2LC) at the Gunsan plant of GM Korea in the fourth quarter of 2016. The new Cruze will be sold in the first quarter of 2017.
Accordingly, the Gunsan plant of GM Korea will emerge as the production base of the new Cruze in GM International Operations (GMI). The GMI is a control tower for overseas business, which generalizes emerging markets including Southeast Asia, Africa, the Middle East and Australia.
Therefore, it is a relief for the Gunsan plant, which rate of operation dramatically dropped due to the withdrawal of GM’s Chevrolet brand from Europe. An official from the industry said, “The Cruze is the representative compact sedan of GM and the driving force model that helped overcome the financial crisis and revive.”
Also, GM Korea is expected to play a leading role in the development projects of GM’s next-gen compact cars. Its next generation compact vehicle called “M3XX” will be mass produced in 2022, and the production plant has not yet been decided.
An official from GM Korea said, “The leaders of GM are well aware of the fact that GM Korea has matchless competitiveness in the development and production of compact cars through the Chevrolet Spark. GM Korea will also play a vital role in the next generation compact vehicle projects.”
GM Korea has come up with measures to increase its share of domestic demand. For more aggressive marketing, it is integrating the relevant organizations, which are subdivided including digital. Also, the company will improve consumer recognition by strengthening the brand identity of Chevrolet.
GM Korea set its domestic sales goal for the year at 167,000 units, an 8 percent increase from the previous year. Last year, it sold 155,000 units in the domestic market, recording the highest domestic sales since it came to the country.
However, the fact that the headquarters’ concerns over rising production costs continue to exist is expected to be an unstable factor for the sustainable growth of GM Korea. Currently, it is producing 14 percent of Chevrolet brand supplies worldwide, but the manufacturing cost per unit has increased to US$1,435 (1.59 million won).
An a meeting with the Korean press at the 2015 Detroit Auto Show in January, GM President Dan Ammann also said, “Due to ordinary wages, GM Korea’s competitiveness is getting weaker as the structure of high costs becomes permanent.” Also, he indirectly expressed his opinion that GM Korea needs to reduce the production costs.