DETROIT/SEOUL: General Motors Co said Tuesday it will close one of its four plants in South Korea and incur an $850 million impairment charge as part of a restructuring of its money-losing business in Asia's fourth-biggest economy.
The US automaker said it would decide the future of its remaining South Korean operations within weeks, and is in talks with the government and labour unions on how to cut costs and make the business profitable.
The Korean plant's shutdown is part of its broader Asia business restructuring. Excluding profits from China, GM said its Asian operations lost money in 2016. GM Korea posted a total of 1.9 trillion won ($1.8 billion) in net losses between 2014 and 2016.
In recent years, GM ceased manufacturing in Australia and Indonesia, and significantly restructured its Thai operations. It said in May it is winding down efforts to sell cars in India and is turning its manufacturing facilities there into an export hub.
The automaker's decisions to exit other unprofitable markets have exacerbated problems for GM Korea, which used to build many of the Chevrolet models GM once offered in Europe. Declining sales of small cars in the United States have also hurt demand for Korean-made Chevrolets.
The first step in the South Korean restructuring plan is the closure of GM's plant in Gunsan, southwest of Seoul, which employs 2,000 out of GM's 16,000-strong South Korean workforce.
The factory was running at about 20 percent of its full production capacity last year, GM said. The automaker's three other assembly plants in South Korea built 485,403 vehicles in 2017.
GM sells Chevrolet and Cadillac brand vehicles in Korea, and more than half the vehicles built by GM's Korean plants are exported.
"Time is short and everyone must move with urgency," GM President Dan Ammann told Reuters.
The move is the latest in a series of steps the US automaker has taken to put profitability and innovation ahead of sales and volume. Since 2015 GM has exited unprofitable markets including Europe, Australia, South Africa and Russia.
GM's plan places South Korean President Moon Jae-in in an uncomfortable spot as he has pledged to create more jobs and provide job security as his top economic policy. Opposition lawmakers criticized Moon's administration on Tuesday for the potential job losses from GM's strategy for the country.
The South Korean government said in a statement it regretted GM's "unilateral" decision to close the plant. It said it wanted to conduct an audit of the automaker's local arm, GM Korea, as it weighed options to help with the restructuring plan.
GM said in a statement it would take the $850 million charge to reflect the restructuring costs, including $375 million in cash related to employee expenses. Most of the financial writedowns would be recorded by the end of the second quarter.
South Korea had for years been a low-cost export hub for GM, producing close to a fifth of its global output at its peak. But sharp rises in labour costs, weakening demand for sedans, which GM Korea mainly produces, and big investments in neighbouring China hurt the South Korean business's competitiveness.