Korean plant closure hits Holden

THE future of four Holden models – the Astra Sedan, Barina, Trax and Spark – are up in the air as parent company General Motors reviews its unprofitable South Korean operations.

GM has already announced the closure of GM Korea’s Gunsan factory – a former Daewoo plant – by the end of May, and told news outlets that it is in negotiations with various stakeholders about the future of the remaining three GM plants in South Korea.

The Gunsan plant makes the Chevrolet Cruze Sedan that is shipped as the Holden Astra Sedan to Australia where it is sold alongside the Polish-built Astra Hatch and UK-made Astra Sportwagon.

GM says the Gunsan plant is running at only 20 per cent of capacity and thus is “unsustainable”.

Announcing the closure, GM International president Barry Engle said: “The performance of our operations in South Korea needs to be urgently addressed by GM Korea and its key stakeholders.

“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 next steps.”

Despite the decision to close Gunsan, GM Holden product and brand communications senior manager Mark Flintoft told GoAuto that Holden’s product plan remained unchanged at this time.

“We have a good level of inventory to meet customer demand for the time being,” he said. “GM is working with key stakeholders on future plans.”

Possibilities for the Astra Sedan appear to include shifting production to another Korean plant, sourcing it from a GM plant in North America or China, or dropping it altogether.

The Astra Sedan is Holden’s small car price leader, priced from $20,490 plus on-road costs - $1000 cheaper than the five-door hatch.

The Holden Barina light hatch – also known as the Chevrolet Sonic and Aveo – is built for Australia at the Incheon plant that also turns out the Trax small SUV.

Holden’s smallest car, the Spark hatch, comes from Chanwon factory in Korea.

GM Korea turned out more than 500,000 vehicles for the Korean domestic market and export last year. However, that is well down on the 783,000 made in 2013.

The Gunsan plant closure is expected to cost GM up to $US850 million ($A1.08b), with a large slice of that going to cover redundancy packages for the 2000 employees there.

Decisions on the remaining plants could be made as early as the end of February as GM tries to get all of its global manufacturing operations on a profitable footing.

With GM selling its Opel and Vauxhall operations to France’s PSA Group last year and then closing its Australian manufacturing operations in October, America’s biggest motor manufacturer is clearly ready to make hard decisions.

So far, GM’s preference is to keep the remaining Korean plants open, albeit with major changes.

GM said in a statement: “The company has proposed to its key stakeholders — including its labour 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.”

GM has long had a struggle to make its South Korean operations live up to its expectations. It began by sourcing low-cost vehicles from Daewoo, but quality was a continual nightmare.

When Daewoo went bankrupt in the Asian financial crisis in 1999, GM stepped in to take over control with a 77 per cent buyout in 2001, with the remaining shares going to GM’s Chinese partner, SAIC Motor, and the South Korean government development bank.

In the past, GM and Korean unions have bumped heads frequently and hard but eventually come to a workplace arrangement. This time, GM appears to want more than just a short-term make-do deal.

If a restructuring deal falls through this time, China and Mexico might be the go-to countries for GM and Holden.

Holden has just begun importing its new Equinox SUV from Mexico where GM has a plant that produces Cruze and Sonic (Barina) for North America.

GM Shanghai also makes these vehicles, although the current Chinese Cruze is substantially different to the international model.