Chevy Exit From Europe Means GM Job Cuts in Korea

General Motor headquarter

Recent speculation about General Motors (NYSE:GM) cutting back on its South Korean presence appears to have been accurate. According to Reuters, the planned withdrawal of Chevrolet from the European market will have a direct impact on the South Korean workforce. A source inside GM Korea said the move could lead to nearly half the production workers at the Gunsan plant losing their positions, Reuters reports.

The Gunsan GM factory is located in the southwestern part of South Korea and employs 2,200 manufacturing workers. Overall, GM is expected to scale back its production in Korea by anywhere from 15 to 20 percent in 2014. After announcing it would no longer sell the Chevrolet brand in Europe beyond 2015, most observers looked to the supply chain of Korea in anticipation of job cuts expected to arrive soon. In December, GM began offering voluntary retirement to more than 6,000 non-manufacturing employees ahead of the Chevy withdrawal from Europe.

At the Gunsan factory, the focus is expected to be on the workers on the assembly lines. An inside source told Reuters about half of the 2,200 workers would lose their positions as GM planned to scale back its production by half. Union officials hoped GM would agree to simply reduce the number of cars expected every hour while keeping the same number of employees, but the obviously inefficient scheme makes that idea a long shot with company executives.

Though the proposed job cuts would have an immediate impact on worker morale in a factory producing 120,000 vehicles per year, a significant percentage of those affected may be temporary hires, of which 500 are employed at the GM Korea plant.

General Motors will be forced to make tough decisions in different global markets as the automaker hopes to improve efficiency and strengthen the performance of its different brands abroad. Despite the pullout in Europe, GM is actually increasing Chevy’s presence in Russia from both production and marketing standpoints.

While mixing the Chevy and Opel brands in the same market is a strategy GM abandoned in Europe, the automaker may try to differentiate the two by introducing premium Chevy vehicles such as the 2014 Corvette Stingray. GM has such a crowd-pleasing supercar on its hands in the new Corvette that it may be a useful tool in meeting difficult challenges in a complex auto market.

New GM chief executive Mary Barra expressed optimism for the company’s approach in Europe in a recent press conference. Barra said that new president Dan Ammann would help make European operations more efficient by being more aggressive. That means tough decisions at plants around the globe, and South Korea may be the first to feel the effects of a new GM regime.

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