GM Korea Posts Worst-ever Net Loss of 986.8 Billion Won in 2015
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According to industry sources on April 10, GM Korea reported 594.4 billion won (US$515.30 million) in operating losses and 986.8 billion won (US$855.48 million) in net losses last year. It is the worst-ever performance since its establishment in 2002.
Industry watchers think that it is largely due to 186.9 billion won (US$162.03 million) of the equity method loss caused by its decision to shut its local factory following the withdrawal of the Chevrolet brand from Russia. GM Korea halted sales of the Chevrolet products in Russia last year.
Moreover, higher labor costs despite the decrease in car sales also added to its worst-ever performance. The automaker shipped a total of 621,872 units at home and abroad last year, down 1.4 percent from the previous year. However, its labor union has strongly protested the company’s decision to continue importing all units of its full-size sedan Impala from the United States for sales in Korea despite strong sales at home.
GM Korea is looking for various ways to improve its financial state. The automaker has decided to organize a special task force team with staffs across the company, including labor union and management, in a bid to prepare measures to revitalize sales in the local market. Starting in January, it has introduced a direct sales system that guides individual dealerships to sign direct contracts with the automaker unlike in the past when they were in touch with regional dealers. This change has simplified the overall retail structure of GM Korea and is expected to cut tens of billions of won of annual costs.
Questions & Answers
Q.What were the main reasons for GM Korea's operating losses in 2015?
What were the main reasons for GM Korea's operating losses in 2015?
Operating losses were largely due to an equity method loss from shutting a factory after the Chevrolet brand withdrew from Russia. Also, compensation for exaggerated fuel economy claims and higher labor costs contributed to the poor performance.
Q.How much did GM Korea have to pay in compensation for the Cruze's fuel economy claims?
How much did GM Korea have to pay in compensation for the Cruze's fuel economy claims?
GM Korea decided to pay Cruze owners up to 430,000 won per person to cover the difference in fuel economy. The total compensation amount reached as high as 37 billion won last year.
Q.What steps is GM Korea taking to improve its financial situation?
What steps is GM Korea taking to improve its financial situation?
The automaker has organised a special task force with staff, including labor union and management, to revitalise local market sales. It also introduced a direct sales system for dealerships in January, aiming to cut annual costs.
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