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GM to shut down S.Korean plant

GM to shut down S.Korean plant

General Motors is closely scrutinizing its South Korean operations, to the point of closing one of its assembly plants in the country.

GM's Korea operations have been struggling with rising labour costs and slumping domestic sales, fuelling concerns over a potential pullout.

GM isn't ready to give up on Korea, however.

The intended plant is in Gunsan, 270 kilometers south of Seoul, as it has been underutilized, running at 20 percent of its aptitude for the past three years.

With a manufacturing capacity of 250,000 vehicles at GM's Gunsan plant set to be gone by May, experts argue that a chain reaction caused by the shutdown, including GM's possible withdrawal from the South Korean market, will have an adverse effect on the rest of the automobile industry, dealing a severe blow to its competitiveness.

GM President Dan Amman said future investment plans for the remaining three plants depend on whether the South Korean government is willing to provide financial aid and whether GM Korea Union workers are willing to take pay cuts. "We recognize the contribution and support of our employees, the wider Gunsan and Jeonbuk communities and government leaders, particularly through the most recent hard period", Kaher Kazem, GM Korea President and Chief Executive said in a statement, adding that the company is committed to helping all of its affected workers through this transition. GM stock has lost just under 1% so far this month as the S&P 500 Index dropped nearly 6%.

GM sells Chevrolet and Cadillac brand vehicles in Korea.

Last year, GM Korea sold about 132,377 vehicles in Korea - down 27 percent from a year earlier - and exported 392,170 vehicles to 120 markets around the world. The total workforce employed by GM Korea's suppliers and other support companies is estimated at roughly 300,000 per the local union, which called the Gunsan decision "unreasonable and absurd".

AKorea official said that the decision came after concluding that it is impossible to pursue a turnaround while maintaining all production equipment.

"We have a very bad trade deal with Korea", Trump said during a meeting with a bipartisan group of lawmakers to discuss steel and aluminium imports.

Unionized workers at the carmaker vowed to stage a sit-in protest, accusing the company of trying to shift the blame onto them for years of losses.

GM said 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 largest economy. "We can't admit this and it's absurd the company is blaming us for the loss after pulling out Chevrolet from Europe".

South Korea has been a low-priced vehicle export destination for the firm with a vehicle production estimated at one-fifth of its global automobile production.

In order to stay, GM said it will need to see significant progress by the end of February in its talks with the union, government and Korea Development Bank, which owns 17 percent of the automaker's business there. The Detroit automaker owns 77 percent of the operations while GM's main Chinese partner, SAIC Motor Corp Ltd 600104.SS , controls 6.0 percent.

"There appears to be no part of the business that is safe from the microscope", said Dave Sullivan, an automotive analyst with AutoPacific, an automotive consulting firm.