General Motors announced that it will close one of its four plants in South Korea as part of the company's restructuring process.
The carmaker will incur a US$850-million impairment charge to shut down operation, Reuters reported. “Time is short and everyone must move with urgency,” GM President Dan Ammann told the agency. Charges could include US$375 million in cash related to employee expenses, the company disclosed in a statement.
GM Korea posted a total of US$1.8 billion in net losses between 2014 and 2016.
The closure of the plant is part of the company's overall business restructuring process in Asia. General Motors will make a decision, in the upcoming weeks, on whether to shutter the other existing assembly plants in the region.
The company is closing its Gunsan plant in the southwest of Seoul, which employs 2,000. GM employs 16,000 people in South Korea. The automaker operates three other assembly plants which output almost 500,000 vehicles in 2017.
The U.S. automaker is in talks with the South Korean government and several labor unions on how to cut costs and make the business profitable. The outcome of talks will determine how the company moves forward.
South Korea was, for many years, a low-cost export hub for GM, producing almost one-fifth of the company's global output. But, labor costs, diminishing demand and large-scale investments in China have eroded GM's ability to remain competitive.
The company started closing down operations in unprofitable regions including Europe, Australia, South Africa and Russia, since 2015. The carmaker also ceased manufacturing in Indonesia as well as significantly restructured its Thai and Indian operations.
South Korea's state-run development bank owns a 17 percent stake in GM Korea.
An official at the Korea Development Bank said GM had declined a request for an audit, a CNBC report stated. "There are some issues to be resolved to find out ways to help the company, such as a shareholder audit, but GM has not listened to us," the official disclosed.
GM sells Chevrolet and Cadillac brand vehicles in Korea.