General Motors officially closed its Gunsan car assembly plant in South Korea on Thursday, as part of a restructuring plan first announced in February which aims to return its loss-making local subsidiary to profitability.
The Gunsan plant was hit hard by GM’s decision to withdraw its Chevrolet brand from Europe and other global markets over the last few years. Capacity utilisation at the 260,000 unit/year facility, which made the Cruze compact car and the Orlando MPV, fell to around 20% last year.
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GM’s local subsidiary, GM Korea posted cumulative net losses of KRW3.134trn (US$2.92bn) in the three years to the end of 2017, due to falling domestic and overseas sales and high costs.
The company is 77%-owned by General Motors, 6% by its Chinese partner SAIC Motor and 7% by the state-run Korea Development Bank (KDB).
Production at the Gunsan facility is understood to have stopped much earlier in the month, leaving GM Korea to sell off existing inventory in its domestic market.
The closure leaves the company with three plants in the country with a combined annual production capacity of 500,000 vehicles.
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By GlobalDataAround 200 of the remaining 680 Gunsan workers that did not accept a severance package will be relocated to other plants in the country, including Changwon and Bupyeong, as part of one of the few concessions GM made to unions during drawn-out negotiations over the last few months.
The 480 remaining workers will get unemployment benefits from the government worth US$1,700 per month and additional financial support from GM Korea, both for a period of three years.
GM Korea has yet to decide what to do with the plant, as no potential buyers have come forward with any expression of interest.
GM and KDB signed the binding agreement to keep GM Korea afloat for at least ten years and agreed to inject a combined KRW7.7 trillion (US$7.2bn) into the company, including KRW6.9 trillion won from GM and KRW810 billion from KDB.
The US automaker, for its part, will swap US$2.8 billion worth of debt into equity and provides fresh loans worth US$3.6bn for working capital and to invest in facilities.
Under the deal, GM will not be able to sell any shares in GM Korea until 2023 and is required to keep its holding above 35% until 2028.
To help reverse its falling sales, GM Korea plans to launch 15 new and upgraded vehicles in the domestic market in the next five years, starting with a facelifted Spark this month, the introduction of the Equinox SUV from the USA in June and an upgrade to its locally-made midsize Malibu sedan later in the year.
See also: GM Korea outlines plan for profitability by 2019
GM shuts Gunsan but Opel-Vauxhall deal continues
Trump tariffs could endanger GM Korea rescue plan
