Howes: GM's bid to build value sweats South Korea unit
Howes: GMâs bid to build value sweats South Korea unit
Auto workers in South Korea are learning just how serious CEO Mary Barra is about General Motors Co. becoming what she calls the worldâs most valued automotive company.
After 16 years there and billions invested, the Detroit automaker is deep in the throes of evaluating whether to close one of four plants and to cut headcount by roughly 10 percent or pack up and leave once-promising South Korea. Overall employment remains at 17,000 even as annual production has slumped to 450,000 from 1 million units annually.
Thatâs not an accident. GM decisions over the past few years to pull its Chevrolet brand from Europe, to bolt Russia and India and to exit Europe altogether after 90 years â" all to boost returns on capital â" are combining to hit the GM Korea business hard. And thatâs leaving a grim choice:
The South Korean govern ment, labor unions and the Korean Development Bank that owns 17 percent of GM Korea can help shape the restructuring parent GM is proposing. Or the Detroit automaker likely will hit the exit, continuing its retreat from foreign markets it bet heavily on less than a generation ago.
âOur intent is to work out a viable deal with our stakeholders ... and turn this business around,â David Albritton, a GM spokesman, said in an interview Thursday. âItâs a big deal.â
The odds probably donât favor the famously militant South Koreans, whose pushback to GMâs proposed workout culminated with outraged workers occupying the CEOâs office there and smashing furniture. That doesnât signal an appetite for compromise â" especially one necessitated by GMâs own decisions to leave markets partially supplied by Korean-built vehicles.
South Korea is poised to be next on a lengthening list of highly touted markets where GM would rather quit and look elsewhere for highe r returns than stay, invest and hope to prosper despite the available evidence. Old GM itâs not, as its growing tally of defections effectively demonstrates.
The Old GM, its arrogance untouched by the unthinkable bankruptcy to come, would have doubled down on its Korea play; would have poured more capital into Putinâs Russia; would have rationalized the necessity to remain a player in Europe, even if staying meant occupying a middling market position it struggled to escape.
Not Barra, CEO since 2014, or President Dan Ammann, a former Wall Street banker. Mostly since Barraâs ascendancy to GMâs c-suite, the automaker decided to end production in Australia and Indonesia; peddle South Africa to Isuzu Motors Ltd.; restructure Thailand and cease operations in Venezuela; exit Russia and India; sell Opel on continental Europe and Vauxhall in the United Kingdom to Franceâs Groupe PSA SA.
âSomething canât be a nice-to-do or a good-thing-to-do, but it really has to generate a return,â Barra told investors at a Bank of America Merrill Lynch event in New York on March 28, according to Bloomberg News.
âMost of you are aware of the significant actions that weâve taken to exit or restructure lower-return parts of our business over the last number of years, and weâre currently very involved in this in South Korea.â
Which ought to tell you where this latest round is headed. Itâs not said too often, but the leaders running GM â" many of whom spent most, if not all, of their careers there â" are operating with a decidedly large chip on their shoulder.
With the help of the American taxpayers, their company got a second chance at life. And they got the opportunity to prove that words âDetroit automakerâ no longer must be a synonym for American mediocrity.
This townâs No. 1 automaker is making three fundamental bets, each designed to complement the other. It will maximize its core U.S. business, grounded mor e and more in the profit-rich pickups and SUVs that help finance bet No. 2: investing in and developing electrified autonomous technology that can be used to monetize mobility services.
And bet No. 3: China. Itâs a huge, growing market where demography, regulatory direction and electrified autonomy are destiny for whoever can harness the trends, meld outside innovation with insider engineering and leverage scale in manufacturing.
Bolting South Korea essentially would leave China as GMâs principal Asian hub for engineering, manufacturing and sales. But if thatâs where the automaker is likely to get a bigger return on its capital and a longer growth curve, thatâs probably where it will end up.
Daniel Howesâ column runs Tuesdays, Thursdays and Fridays. Follow him on Twitter @DanielHowes_TDN, listen to his Saturday podcasts, or catch him at 3 and 10 p.m. Thursdays on Michigan Radioâs âStateside,â 9 1.7 FM.Read or Share this story: https://detne.ws/2EIy1gKSource: Google News South Korea | Netizen 24 South Korea