General Motors to shut South Korean plant in move towards profitability

Above, a worker checks cars made by GM Korea at its Bupyeong plant before they are transported to a port for export. (Reuters)
Updated 13 February 2018

General Motors to shut South Korean plant in move towards profitability

DETROIT/SEOUL: General Motors said it will close one of its four plants in South Korea and incur an $850 million (SR3.18 billion) impairment charge as part of a restructuring of its money-losing business in Asia’s fourth-biggest economy.
The US automaker said it would decide the future of its remaining South Korean operations within weeks, amid ongoing talks with the government and labor unions on how to cut costs and make the business profitable.
“Time is short and everyone must move with urgency,” GM President Dan Ammann said.
The move is the latest in a series of steps the US automaker has taken to put profitability and innovation ahead of sales and volume. Since 2015 GM has exited unprofitable markets including Europe, Australia, South Africa and Russia.
GM would take charges against profits of $850 million to reflect the South Korean restructuring costs, including $375 million in cash related to employee expenses, the company said in a statement. Most of the financial writedowns would be recorded by the end of the second quarter.
South Korea had for years been a low-cost export hub for GM, producing close to a fifth of its global output at its peak. But sharp rises in labor costs, weakening demand for sedans, which GM Korea mainly produces, and big investments in neighboring China hurt the South Korean business’s competitiveness.
The plant shutdown is part of its broader Asia business restructuring. Excluding profits from China, GM said its Asian operations lost money in 2016. GM Korea posted a total of 1.9 trillion won in net losses between 2014 and 2016.
In recent years, GM ceased manufacturing in Australia and Indonesia, and significantly restructured its Thai operations. It is also winding down efforts to sell cars in India and is turning its manufacturing facilities there into an export hub.
The automaker’s decisions to exit other unprofitable markets have exacerbated problems for GM Korea, which used to build many of the Chevrolet models GM once offered in Europe. Declining sales of small cars in the United States have also hurt demand for Korean-made Chevrolets.
The first step in the South Korean restructuring plan is the closure of GM’s plant in Gunsan, southwest of Seoul, which employs 2,000 out of GM’s 16,000-strong South Korean workforce.
The factory was running at about 20 percent of its full production capacity last year, GM said. The automaker’s three other assembly plants in South Korea built 485,403 vehicles in 2017.
GM sells Chevrolet and Cadillac brand vehicles in Korea, and more than half the vehicles built by GM’s Korean plants are exported.
A GM Korea official said the company planned to start a voluntary retirement program for all its workers, not just those at Gunsan, from Tuesday. The official declined to be named as the decision had not been made public.
Ammann said a decision on investments in new models for the remaining South Korean plants to build depended on the government’s willingness to offer funding or other incentives, and on whether unions would agree to cut labor costs.
“If we are successful in working with our stakeholders to restructure and get to a viable cost structure, we would see an opportunity to invest” in new vehicles, Ammann said.
South Korea’s state-run development bank owns a 17 percent stake in GM Korea. The Detroit automaker owns 77 percent of the operations while GM’s main Chinese partner, SAIC Motor, controls 6.0 percent.
An official at the Korea Development Bank said GM had declined a request for an audit.
“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 said, requesting anonymity.

Creditors take action against Al Jaber in decade-long saga

Updated 23 September 2020

Creditors take action against Al Jaber in decade-long saga

  • The downturn in the Gulf construction sector has triggered a number of corporate restructurings as companies are forced to reschedule debt, raise fresh borrowing or enter insolvency protection

DUBAI: Creditors have started to enforce claims against Abu Dhabi-based Al Jaber Group, in a dispute triggered by a construction downturn in the UAE more than a decade ago.

Al Jaber, a contractor with interests across a range of sectors, has struggled since building up debt in the wake of a UAE real estate crisis and began talks with creditors in 2011.

Abu Dhabi Commercial Bank, which is working as restructuring and security agent, said in a document dated Sept. 21 which was seen by Reuters, that it had instructions from the majority of creditors to proceed with claims against Al Jaber.

A representative for Al Jaber did not immediately respond to a request or comment. ADCB declined to comment.

The move follows delays in restructuring agreements, under which Al Jaber was to appoint a new board and sell companies and assets such as the Shangri-La hotels in Dubai and Abu Dhabi.

In exchange, creditors had agreed to extend the maturity of a 5.9 billion dirhams ($1.61 billion) loan, cut interest rates, and provide additional revolving debt.

The initial enforcement action now being pursued by creditors includes the “acceleration and demand for payment of amounts outstanding” under the previously agreed debt restructuring, a source familiar with the matter said.

Enforcement will also allow creditors to claim against Al Jaber’s chairman under a 4.5 billion dirham loan to the company.

Several UAE companies have sought to extend debt maturities or agree better terms in recent years to avoid defaults, after an oil price crash hit energy services and construction.

The coronavirus crisis has added to the strain and Arabtec Holding, the UAE’s biggest listed contractor, this week will discuss options including dissolution after the pandemic hit projects and led to additional costs.

Meanwhile, Dubai-listed construction firm Drake & Scull is working to reach an agreement with its creditors in an out-of-court process.