GM Korea on verge of filing for bankruptcy

Why American cars aren't big in Japan

GM could soon file for bankruptcy protection for its South Korean unit.

GM Korea, which includes four auto assembly plants as well as four engine plants, has been losing money for years. The automaker had been prepared to file bankruptcy Friday in South Korea when This specific failed to reach a cost-cutting deal in talks with its union by a company-imposed deadline. although This specific agreed late Friday local time to put those plans on hold until at least Monday evening while negotiations continue with the union as well as the South Korean government.

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A bankruptcy filing in South Korea will have little effect on GM’s US operations. The overall company filed for bankruptcy in US federal bankruptcy court in 2009, in a reorganization process of which was funded by a federal government bailout at of which time.

GM Korea has about 16,000 employees as well as about 300 dealerships inside the country. although This specific can be a distant third in terms of car sales in South Korea, well behind Hyundai as well as Kia which are both owned by Hyundai Motors. Figures by GM show This specific sold 132,000 locally-built cars in South Korea last year, or about 7.4% of the market. By comparison, Hyundai as well as Kia account for about two-thirds of the Korea market.

GM also sold about 2,000 Cadillacs in South Korea of which were built in US auto plants. Its overall South Korean sales in 2017 were down about 25% by a year earlier.

Related: American automakers won’t get much help by brand new South Korean trade deal

inside the South Korean market, GM Korea can be essentially the third horse in a two-horse race said Rebecca Lindland, executive analyst with Cox Automotive.

“Hyundai as well as Kia are so dominant here, of which This specific’s very difficult for anyone else to be profitable,” she said by South Korea, where she was meeting with auto industry officials. She said the expectation among South Korea auto executives can be of which even if GM Korea reaches a deal to avoid bankruptcy, This specific’s not necessarily long for the market.

gm assembly line south korea
An GM Korea assembly line. GM could soon file for bankruptcy protection in South Korea.

She pointed out GM recently pulled out of a much larger as well as more important market in Europe to stem continuing losses.

“GM will probably pull out of the Korean market in three or four years,” she said. “This specific’s just not worth This specific any more.”

although the South Korean plants are essentially there to supply some other markets, including the United States, with cheap little cars as well as SUVs. Last year This specific exported about 400,000 cars, as well as another 500,000 vehicle kits of which went through final assembly elsewhere. Most of those exports go to the US as well as Europe. Less than 2% go to the major auto markets in Asia such as China or Japan.

Related: GM cutting 1,500 jobs at Ohio plant amid falling demand for little cars

GM reports of which GM Korea lost 148 billion South Korean won last year, or about $139 million. of which’s less than than the 2016 loss. GM Korea had already announced plans in February to close one of the four assembly plants This specific operates there. although This specific said This specific can be willing to invest a different $2.8 billion in GM Korea as part of a turnaround plan, although only if This specific can win a deal to cut costs as well as make the business profitable.

GM Korea was formed out of the remains of Korean automaker Daewoo, which itself went bankrupt in 2000. GM bought about 45% of the company out of bankruptcy for $251 million in 2002, then invested a different $571 million over the next decade to bring its stake up to 77%.

CNNMoney (brand new York) First published April 20, 2018: 12:59 PM ET

Source : GM Korea on verge of filing for bankruptcy