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General Motors Company To Take $850M Charge With Closing of Korean Plant

The fate of three other plants in the country will be decided in the coming weeks as GM pushes its Asia ops restructuring

By InvestorPlace Staff

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General Motors Company (NYSE:GM) will close one of its four plants in South Korea and take an $850 million impairment charge as it restructures its money-losing business in the country. GM stock has lost just under 1% so far this month as the S&P 500 Index dropped almost 6%.

GM has been aggressively addressing underperforming businesses globally, and is now focused on finding a solution for its South Korean operations, the company said in a press release.

Most of the writedowns will be by the end of the second quarter, according to news reports. The fate of the company’s other South Korean operations will be determined in coming weeks as GM progresses in talks with both the government and labor unions on cost cutting to turn the business to a profit. “Time is short and everyone must move with urgency,” GM President Dan Ammann told Reuters.

Under CEO Mary Barra, General Motors has been moving to put profitability and innovation ahead of sales and volume. In the past three years, the automaker has exited unprofitable markets in Europe, Australia, South Africa and Russia. InvestorPlace contributor Dana Blankenhorn earlier this month commented that Barra, who was considered a lightweight when she took the CEO job, is now being lauded by the media as a visionary who has firmed up the balance sheet, cut unprofitable ventures and delivered consistent profits while investing in the future.

GM has for years positioned its South Korea operations as a cheaper export hub, responsible for nearly 20% of the carmakers worldwide production at its peak. That’s changed in recent years as labor costs there have increase and investments next door in China chipped away at the South Korean business’s competitiveness, according to reports.

The plant shutdown is part of its GM’s  Asia business restructuring. Excluding profits from China, GM said its Asian operations lost money in 2016, according to Reuters. GM Korea posted a total of 1.9 trillion won ($1.8 billion) in net losses between 2014 and 2016.

General Motors last week reported fourth quarter earnings per share of $1.65. That was an increase over its earnings per share of $1.28 from the same time last year.

In a research note last week, Barclays analyst Brian Johnson said restructuring Korea might not have a “significant impact” on GM’s bottom line but “serves as a reminder of how nimble management has been, playing only in areas where it can win,” according to the Wall Street Journal.


Article printed from InvestorPlace Media, https://investorplace.com/2018/02/general-motors-company-will-take-850m-charge-closing-korean-plant/.

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