GM Recommits To Korean Factories

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GM CEO Mary Barra recently made it clear she has no intention on scaling back operations at Korean factories. With trade tensions abounding throughout the world, the automaker has to engage in a precarious dance. After all, it already has a network of assembly plants spread around the globe

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There’s been some chatter that GM has been gearing up to move its small vehicle and EV component production from South Korea to the United States so it can duck tariffs imposed on those products.

But Barra deflated that speculation during a recent earnings conference call, reports The Korean Economic Daily, praising its activities in the Asian nation as “a very efficient operation.”

That decision doesn’t come cheap. With a 25 percent tariff levied on South Korean goods imported to the US, the auto giant attributes that cost for part of its 34.5 percent drop in net income for the second quarter of this year.

The two most popular GM models assembled in South Korea are the Chevy Trax and Trailblazer. While GM has been amping up production of full-size trucks and SUVs in the US, it seems the automaker wants to keep small vehicle assembly going in Korea.

“Korean plants have long been efficient and capable of delivering quality vehicles. The vehicles produced there remain in high demand and contribute positively to our margins,” Barra said.

Part of the reason for this strategy comes from the fact Korean wages are far lower than in the US. With slimmer profit margins on these cheaper, smaller vehicles, even the cost of tariffs isn’t enough to make assembling them Stateside worthwhile – at least that’s how Barra and other GM executives see it.

Interestingly enough, other automakers do assemble small, cheaper vehicles in the US. For example, Honda had moved production of the Civic to Mexico, but with the tariffs announced on imported goods, has said it’s moving the model line back to the US.

Only time will tell if GM will in fact maintain its South Korean footprint, grow it, or start to retreat.

Image via GM

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