As part of its global restructuring that will result in the Chevrolet brand leaving the European market and its Australian production likely stopped, General Motors will probably reduce production in relatively high cost Korea, while making that Asian country its production hub for Australia. Australian media has reported that GM has decided to end production there as early as 2016. With fewer made-in-Korea Chevrolet cars needed for Europe, that capacity could be used to supply Australia.
Last year GM Korea shipped 187,000 Chevy branded cars to Europe. "GM Korea could consider exporting Korean-made cars such as the Cruze compact to Australia if it were to shut down a plant there," a company source told Reuters. In 2012, GM Korea exported ~30,000 vehicles including the Barina/Aveo subcompact and Captiva SUV to Australia, where they are marketed as Holden.
If GM ends production in Australia, following Ford's announcement that it will stop assembling Fords there, Toyota could do likewise, effectively ending Australia's domestic auto industry. Toyota has said that it will make a decision on its future in Australia sometime next year.
While in Detroit a GM spokesman declined comment, a Holden rep said that discussions with the Australian government were continuing. Australia's Industry Minister Ian Macfarlane said no decision had been made. The domestic Australian auto industry has received billions of dollars in government support, though that has been questioned since Prime Minister Tony Abbott's conservative coalition took power in September.
"The message we are getting from Holden is they are in two minds and I would like them to clarify what their position is," Abbott told Australian broadcasters. "There is not going to be any extra money over and above the generous support taxpayers have been giving for some time," he added.
Another factor in the negotiations and in GM's production plans is the free trade agreement that South Korea and Australia signed last week that reduces tariffs on imported cars and automobile components. Last year Australia imported over A$2 billion worth of vehicles from South Korea.
GM Korea released a statement saying that "the phase-out of Chevrolet in Western and Eastern Europe will increase focus on driving profitability, managing costs and maximizing sales opportunities in Korea."
At the same time, Morgan Stanley analyst Adam Jonas also said the trade deal could create pressure on Korea. "It also serves to put a little pressure on the Koreans. The costs in Korea are rising. The labor environment is not the friendliest in the world," he told Reuters.
Industry analysts IHS Automotive predict that GM will cut production in South Korean by ~20% in 2015 compared to this year's ~800,000 units. GM has expressed concerns about labor unrest, wage costs and tension with North Korea at its Korean operations, which represent 20% of GM's global production.
GM is expected to move a large percentage of the assembly of its small Opel Mokka crossover from Korea to Spain next year. Korean production of the compact Gentra car and the Damas and Labo commercial vehicles are also expected to end by the beginning of next year.
"GM Korea's volume decline is seen as inevitable," IHS senior production analyst Ian Park said in an e-mail because GM will make the next generation Cruze somewhere else, as well as possibly the new Aveo.
GM Korea has already reduced output at its Gunsan assembly plant because of slow European demand for Chevrolets. The plant, which has a capacity of 260,000 units, is scheduled to build 147,000 next year, a situation the Korea Metal Workers Union described as "gravely serious".
from The Truth About Cars http://www.thetruthaboutcars.com
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