GM vows long-term investment

Tim Lee, president of GM International Operations, right, and Sergio Rocha, president and CEO of GM Korea, speak at a press conference at the Bupyeong plant in Incheon yesterday. Provided by the company

Tim Lee, president of GM International Operations, said the automaker plans to invest 8 trillion won ($7.38 billion) in its Korean division over the next five years, emphasizing that it represents a strong commitment by the parent company.

“We do not invest 8 trillion won lightly,” Lee said at a press conference yesterday at GM Korea’s Bupyeong plant in Incheon. “We are here to stay and Korea is certainly part of GM’s plan. Our actions speak louder than the rumors that are circulating.”

Speculation that GM may abandon its Korea unit has been making the rounds of late after the automaker reduced its workforce through voluntary retirement and decided not to produce the next-generation Cruze at its Gunsan, North Jeolla plant.

GM’s attempt to buy the 17 percent stake in GM Korea held by Korea Development Bank also was seen by some as an attempt to wrest veto rights from the local bank.

However, Lee, who is also GM’s vice president of global manufacturing, said the speculation should stop since the company has shown its long-term commitment to GM Korea.

“Yes, we intended to buy preferred shares [from Korea Development Bank] because we wanted to clear our debt on our balance sheet,” Lee said. “It was simply a business decision using our cash to improve our profitability, not a message in terms of our interest in staying in Korea.”

As for the Gunsan plant missing out on the Cruze, Lee said GM is coming up with another plan to keep the factory running.

“We just talked with our team in Gunsan about other product programs,” he said. “But it would be different from the next Cruze.”

The nation’s third-largest automaker sold a total of 800,639 vehicles worldwide last year, down 0.9 percent from 2011. Although sales in the domestic market improved to 145,702 units, a 3.6 percent year-on-year increase, exports dipped 1.9 percent to 654,397 units.

To improve these figures, Sergio Rocha, president and CEO of GM Korea, announced the “GMK 20XX - Competitiveness & Sustainability” blueprint for the domestic division’s future.

The plan includes expanding its design center at the Bupyeong headquarters, making it GM’s third-largest after the United States and Brazil. It will double in size with construction to be completed by the end of this year.

The company also announced it will produce six next-generation GM global vehicles and powertrains, including GM’s global mini, small and midsize cars, as well as its first global full battery electric vehicle - the Spark EV - at its Changwon, South Gyeongsang plant.

The automaker will also reinforce its capability in complete knockdown (CKD) production. It exported more than 1.27 million vehicles as CKD kits last year and will seek to make its CKD business the benchmark for GM worldwide.

“GM Korea is expected to be reborn as a more competitive automaker through successful execution of the ‘GMK 20XX - Competitiveness & Sustainability’ plan,” said Rocha. “Based on our first 10 years of accomplishments, GM Korea has now begun a new era for the next decade and beyond.”

GM Korea has played a leading role in small car development, but because the profit margin from those cars also is small the company’s profitability has been declining as sales rise.

The company believes that strengthening the Cadillac brand and the Trax, a small SUV that was unveiled Wednesday, will boost sales and profits.

“In GM, the recognition is that it all begins with a great product,” he said. “Koreans are smart with their spending, but I think we offer our customers here a good choice.”

Although there are many opportunities for GM Korea with an 8 trillion won investment plan, Lee said, there are risks as well.

“We want to improve our relationship with the Korean Metal Workers’ Union labor union and that will lead to success for GM Korea,” he said.

The Ohio-born president was also aware that GM Korea has to cope with the appreciation of the Korean won.

“We can’t control currency, but we hope the incoming Korean government can come up with a solution,” he said.

By Joo Kyung-don [kjoo@joongang.co.kr]