GM Output Cuts in South Korea Loom After Chevy Europe Pullout

General Motor Co. (GM)’s production in South Korea may fall by as much as 20 percent by 2016 after the largest U.S. automaker decided to phase out sales of Chevrolet vehicles in Europe.

Output at the Korean unit, which makes about 90 percent of the Chevy vehicles sold in Europe, may decline 15 percent to 20 percent by 2016 after the decision to pull out the brand from Europe, GM Korea spokesman Park Hae Ho said by phone today.

GM is overhauling its international businesses, with the company announcing last week that it will ditch Chevy to focus on Opel and Vauxhall vehicles in Europe, reversing a decade-old strategy. In August, the company separated its China operations and is currently assessing its options for its Holden Australian unit.

“GM has been struggling to find out the best way to improve productivity and profitability of its units in Europe, namely Opel and Vauxhall,” said Shin Chung Kwan, an auto analyst at KB Investment & Securities in Seoul. “The next logical thing for GM would be to transfer the Chevys produced in South Korea to other markets like Australia if it decides to shut its Holden unit down.”

GM Korea’s labor union opposed GM’s decision, saying the company “deceived” workers by announcing the pull out plans without negotiations, the union said on its website. The guild pledged to gain support from Korea Development Bank, GM Korea’s second largest shareholder, and the Korean government to maintain job security at GM Korea, according to the statement.

GM doesn’t currently have plans to cut jobs in relation to the production cuts, Park said.

The Wall Street Journal earlier reported that GM plans to close its 2 Australian plants. George Svigos, a spokesman for GM’s Holden unit in Australia, declined to comment. Park at GM Korea declined to comment whether a closure in Australia could lead to more exports to the country from South Korea.

To contact the reporter on this story: Rose Kim in Seoul at rkim76@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.