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GM to close down Gunsan plant.

General Motors (GM) Korea has decided to close down its Gunsan plant in North Jeolla Province by the end of May, due to growing losses, the U.S. automotive giant said Tuesday.

The move is part of its restructuring to find a sustainable solution to its years-long operational difficulties, it said.

The decision came as the Gunsan plant had been underutilized, its operating capacity at a dismal 20 percent for the past three years. The plant had produced GM Korea's Cruze, which has been facing sluggish domestic sales.

"This is a necessary but a difficult first step in our efforts to restructure our operations in South Korea. We recognize the contribution and support of our employees, the wider Gunsan and North Jeolla communities and government leaders, particularly through the most recent difficult period," GM Korea CEO Kaher Kazem said in a press release.

"We are committed to supporting all of our affected employees through this transition."

GM Korea is expected to incur costs totaling about $850 million from the shutdown by May. This would include writing down the plant's impairment losses and cash payments to its plant workers, it noted.

These will be reflected in its financial statement at the end of the second quarter of this year.

The company said it will continue to hold talks with its stakeholders over the complete shutdown of the plant by the end of this month to ensure a soft landing for its domestic operations.

"As we are at a critical juncture of needing to make product allocation decisions, the ongoing discussions must demonstrate significant progress by the end of February, when GM will make important decisions on its next steps," said Barry Engle, GM executive vice president and president of GM International.

There have been rumors GM may pull out of the market amid mounting losses.

The state-run Korea Development Bank's (KDB) veto rights to any resolutions proposed by GM Korea's board expired last October. This means GM's key stakeholder KDB cannot do anything should the U.S. carmaker decide to exit Korea.

Now, speculation has further risen following the Gunsan shutdown decision, which could be seen as part of steps to withdraw from Korea.

Upon Kazem's appointment, GM Korea had denied such exit rumors.

GM Korea has been operating here for 16 years, producing 10 million vehicles since its establishment in 2002.

It said it has created approximately 200,000 direct and indirect jobs.

In 2017, GM Korea sold 132,377 cars here and exported 392,170 vehicles to 120 countries.

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Publication:The Korea Times News (Seoul, Korea)
Geographic Code:9SOUT
Date:Feb 13, 2018
Words:494
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