After sustaining “significant losses” for the past several years, GM announced on Feb. 12 that it will close its Gusan plant by the end of May 2018.
The plant has been running about 20% of capacity over the past three years, GM said.
“This is a necessary but difficult first step in our efforts to restructure our operations in South Korea," said Kaher Kazem, CEO of GM Korea. “ We recognize the contribution and support of our employees, the wider Gunsan and Jeonbuk communities and government leaders, particularly through the most recent difficult period. We are committed to supporting all of our affected employees through this transition.”
GM has been aggressively addressing underperforming businesses globally and is now focused on finding a solution for its South Korean operations.
As a result of this action, GM expects to take charges of up to $850 million, including approximately $475 million of non-cash asset impairments and up to $375 million of primarily employee-related cash expenses. Substantially all of these charges will be recorded by the end of the second quarter of 2018, and will be treated as special and excluded from the company’s EBIT-adjusted and EPS-diluted-adjusted results.
The company has proposed to its key stakeholders — including its labor union, the South Korean Government and key GM Korea shareholders — a concrete plan to stay in the country and turn the business around that requires the full support of all parties. The proposal includes significant product-related investments in South Korea and would preserve thousands of jobs.
SInce 2002 GM Korea has produced 10 million vehicles. It supports approximately 200,000 direct and indirect Korean jobs.
In 2017, GM Korea sold 132,377 units in Korea and exported 392,170 vehicles to 120 markets around the world.