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GM Reviews South Korea Operations Amid North Tensions

General Motors Co. (GM) Chief Executive Officer Dan Akerson said the company is making backup arrangements for its operations in South Korea as tensions with North Korea heighten.

“We are making contingency plans for the safety of our employees to the extent that we can,” Akerson said in an interview on CNBC today. “Beyond that it’s difficult to shift production.”

While GM can’t change production quickly, Akerson said the company would think about moving work as part of its long-term planning if tensions continue to escalate. GM has five plants in South Korea, where it builds 145,000 vehicles for domestic sales and 1.3 million for export, Akerson said.

North Korea stepped up threats against the U.S, authorizing its military to conduct a potential “smaller, lighter and diversified nuclear strike.” It also transported a missile to its eastern coast, possibly for training and test-firing, marking a further escalation over the regime’s nuclear weapons program and United Nations sanctions against it.

GM has “got to start to think about where you have the continuity of supply and safety of your assets and employees,” Akerson said. The Detroit-based company is seeking advice from consultants on the crisis, Akerson said.

Employee Safety

“Anything that goes on in Korea is critically important to our global production and how we view the world,” said Akerson, who made the comments during a wide-ranging interview that touched on the weakening yen and GM’s improving U.S. sales.

Beyond manufacturing, GM’s Korea operations have taken the lead in developing the Chevrolet Cruze and other small cars, helping fuel an improvement in the company’s product offerings.

GM’s shares rose less than 1 percent to $27.85 at 9:34 a.m. in New York. They’ve declined 3.6 percent this year through yesterday compared with an 8.9 percent gain in the Standard & Poor’s 500 Index.

His interview came after Japan’s central bank said today it will double bond purchases in a bid to end 15 years of deflation. The announcement of the unprecedented easing caused the yen to weaken immediately, driving its biggest slide since 2011.

“You have to be suspicious of what they’re doing and why,” Akerson said, regarding the central bank’s strategy.

The yen’s rally after Japan’s natural disasters in 2011 and its current weakening as the economy is doing “quite well,” is “odd,” Akerson said in the interview.

“The Japanese have had a history of currency manipulation,” Akerson said.

Currency Excuses

Still, the automaker shouldn’t “make excuses about foreign currency,” and must build vehicles where it sells them to lessen the risk of foreign currency changes.

“We’ve got to compete,” Akerson said.

In the U.S., Akerson said the improving housing market and energy industry are driving truck demand. While the average age of vehicles in the U.S. is 11 years, that will shorten, he also said.

“I have a feeling that there’s this underpinning strength that may go for the next four or five years until we get it back into the eight, nine range,” he said.

The automaker increased its share of the U.S. market to 18 percent in the first quarter from 17.5 percent a year earlier, according to researcher Autodata Corp. GM sold 9.3 percent more cars and light trucks in the first three months, ahead of the industrywide gain of 6.4 percent. All four of GM’s brands posted sales gains in the first quarter.

To contact the reporter on this story: Tim Higgins in Southfield, Michigan at thiggins21@bloomberg.net

To contact the editors responsible for this story: Bill Koenig at wkoenig@bloomberg.net; Jamie Butters at jbutters@bloomberg.net

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