South Korean automotive industries in trouble

Cutbacks by foreign automakers are threatening to slash South Korea’s annual vehicle production to below 4 million, a threshold that could doom an industry that accounts for about a fifth of the country’s gross domestic product.

As the global car industry goes through a major downturn activity at carmakers was at a near-record low in August driven in part by the U.S.-China trade war, factories in South Korea are being hit particularly hard.

Busan is the home of the sole assembly plant run by the mid-tier joint venture Renault Samsung Motors. Its 1,800 workers, however, are in danger of losing their jobs due to the shakeup in Renault’s alliance partner Nissan Motor.

As part of the Japanese carmaker’s global production restructure due to a dismal first quarter, Renault Samsung will stop making Nissan’s Rogue sport utility vehicle this year. The model, however, is responsible for nearly half of Renault Samsung’s output, putting the sustainability of the Busan plant in jeopardy.

Despite appeals to assign another model to the factory, Renault has yet to make a decision. The speed of the production lines will drop by 25% starting this month. Renault Samsung offered early retirement packages last month to anyone willing to volunteer, but only a few dozen accepted.

Meanwhile, General Motors subsidiary GM Korea is moving to downsize. In May 2018, the company shut down one of its three domestic plants due to poor sales at home and underperforming exports.

The parent company itself is undergoing a global restructure headlined by the decision last November to close five North American plants. South Korean operations are expected to be the target of further reductions.