+ A

GM Korea had a net loss of $831 million in 2017: KDB

Mar 02,2018
GM Korea suffered a net loss of 900 billion won ($831 million) last year, bringing its total red ink since 2014 to almost 3 trillion won.

According to the Korea Development Bank, the second-largest shareholder in the company, GM provided that figure as part of its negotiations for more support from the Korean government. Results from the previous year are usually released in April.

When compared to the previous year, GM Korea’s net loss was up more than 40 percent.

GM Korea’s revenues for 2017 were estimated to be 10.7 trillion won, a 12 percent year-on-year decline and the lowest level since 2009, when the market was hurt by the global financial meltdown.

GM Korea is in the process of restructuring its operations in Korea while simultaneously negotiating with the Korean government for greater support. It has suggested it could completely leave Korea, and on Thursday it announced the ending of contracts for 200 non-staff workers at its plant in Gunsan, North Jeolla, by the end of this month.

GM has threatened to close Gunsan plant completely by May, which would put 2,000 people out of work.

It is accepting voluntary retirement from its full-time employees also in other GM Korea plants until the end of today.

All of those moves put pressure on the Korean government to provide financial support, as President Moon Jae-in has continuously stressed the importance of expanding jobs, not losing them. Big layoffs could hurt Moon’s party in local elections in June.

The government met GM executive vice president Barry Engle late last month and said that its decisions will come after an independent auditor examines GM Korea’s financial health, which is expected to take at least two months.

The Korean government has argued that GM and GM Korea are accountable for the red ink, and it refused a proposal for a debt-equity swap with the Korea Development Bank chipping in.

GM is also accused of charging its Korean unit too much for automotive parts. While GM Korea’s cost to sales ratio is 93.1 percent, other Korean carmakers including Hyundai Motor, Kia Motors and even Ssangyong Motors have ratios in the 80 percent range.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]