Will GM Have to Move Korean Factories Following Nuclear Threat?
GM (NYSE:GM) faced its toughest times ever during the recession, and now it must face the threat of nuclear war from a North Korean dictator. CEO Dan Akerson acknowledged the potential problem North Korea’s escalation of tensions could cause for the automaker, which currently produces 1.3 million vehicles for export every year in South Korean plants. In an appearance on CNBC’s “Squawk Box,” Akerson suggested that widespread trouble in Korea would force GM to consider moving production to other countries.
“You’ve got to start to think about where you have the continuity, the supply and safety of your assets and your employees,” Akerson told “Squawk Box” hosts on Thursday, while acknowledging the complexities such a shift would involve. Considering GM leans on Korean production facilities for local sales and exports, the process of moving operations elsewhere would be costly and time-consuming. However, confronting the dangers of a nuclear weapon-holding neighbor to the north, GM has few options.
Akerson’s appearance marked a departure from the affable chief executive’s typically limited public behavior. Not known for media exposure, Akerson acquitted himself well and reported largely positive news for GM while expressing caution about the auto industry as a whole. Akerson was quick to mention that GM has a long way to go in terms of company-wide goals.
For now, those goals include a frank assessment of the dangers presented by the North Korean regime and an evaluation of Japan’s apparent currency manipulation. Citing the rise of the yen following natural disasters and the currency’s fall in recent months despite economic growth, Akerson noted he was suspicious of the Japanese central bank’s activities while asserting his job was to perform regardless of local conditions.
South Korea is a production site for Chevy Cruze and Spark, two of GM’s top-selling fuel-efficient compact cars. GM has scored wins with these smaller models, but truck sales — driven by U.S. construction industry growth — have also been solid. Akerson said he believes more growth for the auto industry is ahead, though he noted sales would be stronger without the payroll tax increase. Since increasing the number of GM shares in his own portfolio, Akerson’ belief in the company and his ability to drive it further both appear genuine.
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