November 23, 2024

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[THE INVESTOR] US auto giant General Motors is likely to exit Korea, its second-largest shareholder in local operations hinted in a report on Aug. 3.

State-run KDB, with a 17 percent stake in GM Korea -- the parent company holds 77 percent -- has noted in its report to Bareun Party lawmaker Ji Sang-wook that there is not much it can do if the automaker decides to exit the market. 

The report cited the local unit’s worsened business condition, as well as GM’s latest move to withdraw from major overseas markets, among others.
 

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There have been frequent rumors of GM’s exodus from Korea, especially as losses have piled up exponentially in recent years. According to a regulatory filing, GM Korea has incurred nearly 2 trillion won (US$1.77 billion) in losses in the past three years, in addition to suffering from capital impairment. 

GM’s latest decision to exit from its major overseas markets has also sparked the speculation. The firm recently completed a deal to sell its European operation Opel, including the Vauxhall brand in the UK, to France’s PSA Group, pulling out its brand from the region. It also announced its exit from India and South Africa. 

In what may be an ominous sign for GM Korea, its CEO James Kim resigned last month, much before contract expires next March. His successor hasn’t been announced yet. 

If it decides to exit the market and close down all plants after 15 years of business here, it would mean a job loss for over 16,000 employees, including workers at GM Korea’s four plants in the country. The damage would spill over to employees at its more than 300 tier-one suppliers and 3000 tier-two suppliers, according to industry watchers. 

The KDB, however, said it cannot block GM Korea from exiting the market if it decides to do so. 

From October, GM will be lifted from a ban that stopped the US automaker from selling off its GM Korea shares. When it purchased ailing Daewoo Motors in 2002, the carmaker formed an agreement to keep the GM Korea stake for at least 15 years. At the same time, KDB’s right to veto GM expires in October. 

Despite, growing speculation, GM Korea has reaffirmed that the US carmaker has no plans to pull out from the Korean market.

By Ahn Sung-mi (sahn@heraldcorp.com)