GM Korea is teetering, its March sales crashing by 58% and the Chevrolet brand even falling below Mercedes-Benz in the domestic market. Exports of fully built models are faring better, although shipments of SKD and CKD kits are fading. Time to take a look at what the fall-out of a bankruptcy would be for greater General Motors.

Last year wasn’t exactly a great one for GM Korea in its home country. Sales dropped by 27 per cent to 132,377 compared to 180,295 in 2016, giving the Chevrolet brand a 7.4 per cent share compared to 9.9 per cent in the prior year. Hyundai became one of the main beneficiaries, its share edging up to 37.3 per cent, although Kia’s dipped in 2017 to 29.2 per cent. Behind GM came SsangYong (6.0 per cent, up from 5.7 per cent) and then Renault Samsung (5.6 per cent versus 6.1 per cent).

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What used to keep the cash flowing strongly for this GM division was its export business. That took a major hit once GM decided that it would withdraw almost all of its Chevrolet brand models from Europe. Aside from a few which continue to be manufactured in the USA – the Camaro and Corvette among them – all the formerly high volume cars and SUVs were manufactured at GM Korea plants. Knock Down kits for other factories, such as one in India, were another source of volume but this too has dried up.

As was the case with the closure of the Holden vehicle and engine manufacturing operations in the states of South Australia and Victoria respectively, GM Korea’s design studio is likely to be unaffected by any shut down of production operations. That certainly won’t apply to the Holden vehicle range though, which would take a major hit should General Motors decide to stop building cars in South Korea.

Currently, GM Korea produces the following vehicles:

See Also:
  • Buick Encore (for North America)
  • Chevrolet Spark (Beat in some countries) and kits for GM Uzbekistan
  • Chevrolet Aveo (also sold as Sonic)
  • Chevrolet Damas and kits for GM Uzbekistan
  • Chevrolet Lacetti kits for GM Uzbekistan
  • Chevrolet Cruze
  • Chevrolet Captiva kits for GM Uzbekistan
  • Chevrolet Malibu and kits for GM Uzbekistan
  • Holden Spark
  • Holden Barina (rebadged Aveo)
  • Holden Trax
  • Holden Astra sedan (rebadged Cruze)

Holden has the largest exposure to any potential closure of GM Korea and even more worrying for the division, several replacement models are due out within the next 12 months. That includes the Barina hatchback and Trax SUV. A successor for the Spark is as far off as 2023, the forthcoming Acadia large crossover will be built in the USA, the Commodore comes from Germany, the Colorado and TrailBlazer from Thailand, Equinox from Mexico and five-door Astras from England and Poland.

Imagine trying to manage Holden’s hedging, especially with the A-dollar one of the developed world’s most notoriously volatile currencies. As well as that ongoing issue and a brand which continues to sink in the Australian market (it’s doing better in NZ at least), GM Holden might very soon have a large headache to deal with if its future supply of small and compact vehicles dries up.

Buick is potentially less of an issue as GM should be able to switch Encore sourcing out of Bupyeong in Korea and into China (SAIC GM: Dongyue, Shandong) or Mexico (San Luis Potosí). There might be a hiatus though, and that would be a big issue for the brand’s US dealers. During the first quarter they were able to move 25,468 units of the compact SUV, a year-on-year gain of 27 per cent.

It wouldn’t be a quick change to start making the Encore in Mexico as even though its twin the Chevrolet Trax is made there, the Buick has many unique parts. Adding further complication, both models are scheduled to be replaced in 2019. The G2UB second generation Encore is in theory only about a year away so what plans GM Korea would have had for preparing to manufacture it at Bupyeong will be up in the air.

Placing its Korean subsidiary into rehabilitation* would probably see GM exiting the local market, some 16 years since it took control** of the assets which it cherry-picked from the ashes of the failed Daewoo Motor. It will be a costly process in multiple ways. How the damage to other GM brands in other regions can be limited, and where multiple next generation vehicles will be built are surely right now being war-gamed in Detroit. Time is not on General Motors’ side.

*In South Korea, a court-led debt restructuring is a lengthy process which is led by an appointed administrator. Even whilst it is undergoing what is known as ‘rehabilitation’ the firm in question may still be bankrupted or even liquidated in some circumstances.

**General Motors, with 77 per cent of the shares, is the majority owner of GM Korea. Its co-owners are SAIC (6.0 per cent) and KDB (17.0 per cent).