General Motors Co. has adopted a clear strategy outside the U.S.: If the carmaker doesn’t see a path to profit, it’s going to bail.
The next operation to face pressure under this no-nonsense, nothing-sacred approach looks like it’ll be South Korea. Chief Executive Officer Mary Barra has put GM stakeholders there on notice that costs are too high and something has to be done to turn things around.
“We’re going to have to take actions going forward to have a viable business,” Barra said of GM’s Korea operations on a conference call with analysts. GM reported a better-than-expected profit that was almost entirely earned in North America.
Barra, 56, has been ditching poor-performing business units to play to GM’s strengths. Almost four of every five vehicles the automaker sold worldwide last year went to customers in China or North America. The rise of electrification and self-driving technology that’s straining automakers that have been around for more than a century also has played into the company’s calculus to slim down.
“It sounds like they’re going to do something very drastic in GM Korea this year,” David Whiston, an analyst with Morningstar Inc. in Chicago, said by phone. “Given the prior history, my expectation would be an outright exit.”
GM’s manufacturing costs in Korea have gone up while its local sales plunged 20 percent to 134,385 vehicles last year, spokesman Jim Cain said. Industrywide deliveries shrank 1.7 percent last year to about 1.8 million, according to data from the company.
While GM acquired financially troubled Korean carmaker Daewoo in 2002, consumers there have still gravitated toward cars made by local players Hyundai Motor Co. and Kia Motors Corp.
GM will take steps that “may result in some rationalization actions or restructuring that potentially could have a material impact on our results,” Barra said. “It’s too soon to tell right now.”