SEOUL, KOREA - As GM Korea is reducing output in its Bupyeong and Gunsan assembly plants, suppliers are feeling the pinch. Korea's No. 3 car maker after Hyundai and Kia produced a total of 785,518 cars last year, down 2.5 percent from the previous year.

 

 

For the first two months this year, it has produced 101,613 cars, down 19.2 percent from the same period a year ago. The biggest reason for the increasingly shrinking car output is a downturn in the European market. GM Korea is responsible for 90 percent (about 150,000 cars) of Chevrolets sold in Europe.

 

To make matters worse, the headquarters in Detroit announced in late last year that it would pull out its Chevrolet brand of Europe by the end of 2015 due to worsening profitability there. That means no more market for the Gunsan plant from 2016.

 

An official of a company that supplies engine parts to GM Korea said, "In addition to complete cars, the demand for knocked-down kits is also in decline. If we can't run the capacity use at a high level, our financial situation is bound to get worse because we have to pay workers and other fixed costs as before."

 

The knocked-down kit sales of GM Korea last year was 1,184,774 sets, down 7.2 percent from the previous year. The cumulative export volume for the two-month period this year was down 4 percent year on year.

 

GM's exit from Korea will accelerate for years to come. Already the company decided to produce the next-generation model of the compact sedan Cruze elsewhere. The Cruze is currently produced in the Gunsan plant. A plan to keep assembling the follow-up model of the subcompact Aveo at the Bupyeong plant was also scrapped. GM Korea president Sergio Rocha has instituted the voluntary retirement program three times since his inauguration in 2012.

 

Accordingly, local suppliers are facing a situation in which they have to cut back on payrolls. A president of a part supplier said, "Unless GM Korea comes up with future plans for its Gunsan plant quickly, so many of local suppliers will have no choice but to go bankrupt. According to the city government of Gunsan, the number of employees working in GM supplier firms within the city is 7,000, including 4,500 in primary suppliers and 2,500 in secondary and tertiary suppliers.