General Motors is pulling out Chevrolet from Europe by the end of 2015 and as a result, its assembly plants in South Korea would be saddled with excess capacity but GM now says that it has made adjustments and is now quickly recovering from the blow. CEO Sergio Rocha said that the four assembly plants of GM Korea accounted for around 20% of GM’s global sales in 2014.
GM announced its European pullout in late 2013. GM would be burdened with an annual excess capacity of 150,000 vehicles. Rocha has been quick to tap new markets and has acquired new production allotments, already making up for the sales loss.
The 55-year-old Rocha, a veteran of GM engineering for 35 years, said that GM made a “tough call” in getting out of European but he insists that it was the right one since the company had to stop the bleeding and avoid further losses.
Rocha said that GM Korea has already recouped 35-40% of the volume losses in Europe. GM plans to ship the Korea-built Chevy Trax compact crossover to the U.S. and intends to produce more knockdown kits of the Orlando small crossover to be assembled in Uzbekistan. On the other hand, GM will be shutting down its local plants in Australia in 2017, allowing the transfer of production to GM Korea.
Rocha also revealed that GM Korea built almost 34% of the Chevrolet brand’s global volume in 2014. He aims for Korea’s production level to be sustained, even after the European market has been dropped. When interviewed by Automotive News at the recently held Seoul Motor Show, Rocha said that the company sees its opportunity to recover from the losses.
For instance, Rocha said that in late 2016, the next-generation Cruze compact car will start production at GM's Gunsan plant for local and export markets. Securing Cruze output will aid GM Korea to increase factory utilization rates; however, there are more obstacles ahead. GM Korea has yet to totally cope with the loss in European volume.
High labor costs, as well as other factors, will affect the long-term possibilities for local output. It’s still undecided if GM Korea will continue to build the Chevrolet Sonic (known as the Aveo in certain markets) when the next generation is launched. GM Korea is also working to raise its local sales.
For three consecutive years, GM's sales in South Korea have been on the rise, going up 10% to 155,000 units in 2014 from 141,000 units in 2011. It had a market share of 9.3% last year. Most of that figure is composed of locally built Chevys.
Chevrolet is the No. 3 largest brand in South Korea behind Hyundai and Kia. However, the tally includes luxury marque Cadillac, which is new in the market.
Cadillac, which imports its vehicles from the U.S., posted a 68% rise in sales to 504 units in 2014 compared to the former year. Rocha’s goal is to more than double Cadillac sales in South Korea this year.