Will Trump's auto tariff push GM Korea to exit the country?

U.S. President Donald Trump's recent warning of a 25 percent tariff on automobiles threatens the very existence of GM Korea, which posted an export rate for its vehicles of 95 percent last year.

GM Korea CEO Hector Villarreal speaks about the company's business strategies during a press conference on Feb. 4, 2024. [GM KOREA]

[NEWS IN FOCUS]

U.S. President Donald Trump’s warning of a 25 percent tariff on car imports has further escalated the chances of General Motors closing its export-oriented Korean factories.

Rumors about GM Korea closing up shop have been floating for years, but the recent tariff announcement puts the Korean unit in serious jeopardy as such a move would make its three manufacturing plants less favorable locations.

Paul Jacobson, chief financial officer of General Motors, hinted at a conference on Wednesday that the company has to think about “where to allocate plants or move plants, if the tariffs become permanent,” according to a Reuters report.

U.S. President Donald Trump speaks to reporters after landing at Palm Beach International Airport in Florida on Feb. 16. [AP/YONHAP]

The consideration comes as Trump on Tuesday said the auto tariff rate will be “in the neighborhood of 25 percent,” with more details coming on April 2.

GM Korea sold a total of 499,559 cars in 2024, and of them, exports made up 95 percent, or 474,735 units. Of the exports, 88.5 percent, or 418,782 units, were shipped to the United States.

The shift in focus to exports was triggered by plunging domestic sales, which peaked at 180,275 in 2016, before slipping 87 percent to 24,824 units in 2024, the lowest figure for any carmaker in the country.

General Motors in 2002 acquired the near-bankrupt Daewoo Motor and changed its name to GM Korea. With the lingering sales slump, GM Korea shut down a plant in Gunsan, North Jeolla, in 2018, and has been running only three facilities in Korea — one in Bupyeong, Incheon, one in Changwon, South Gyeongsang, and the last one in Boryeong, South Chungcheong, producing auto parts.

“GM Korea is a de facto production base for U.S. exports, and General Motors has been maintaining it because Korea and the United States have long been partners with tariff exemptions for automobiles,” said Moon Hak-hoon, an automotive engineering professor at Osan University.

“But if the 25 percent tariff is realized, why would General Motors make cars in Korea and pay the tariffs?” Moon added. “General Motors may consider other options, like boosting capacity in foreign plants instead.”

GM Korea's manufacturing plant in Bupyeong, Incheon [YONHAP]

General Motors had already once attempted to pull out of Korea in 2018 as part of global restructuring plans, but walked back the withdrawal on aid from the Korean government. Seoul injected some 81 billion won ($56.3 million) for its existence and it survived, but at the expense of closing down the Gunsan factory.

GM Korea only produces the Trailblazer compact SUV for the domestic market and Trax crossover SUV for export. The labor union of GM Korea has consistently demanded that General Motors allocate EVs to their factories, but headquarters has denied the request.

GM Korea held voluntary resignation programs for its salaried employees last year, cutting its workforce by around 100.

The number of dealerships, which stood at 304 in 2016, declined to 93 as of last year.

“Under the new tariff system, GM Korea cannot survive with the current sales landscape,” said Lee Hang-gu, a researcher at consulting firm Automotive Intelligence Networks.

“Korea can offer an export quota as an alternative to persuade Trump, but even so, GM Korea would have to shut down one of the two [car assembly] plants, which may later become an outright exit,” Lee added.

Chevrolet Trax SUVs awaiting to be exported at a port in South Gyeongsang [GM KOREA]

BY SARAH CHEA [chea.sarah@joongang.co.kr]