Tensions in Korea have GM on alert

Tensions in Korea have GM on alert
Thu, Apr 4 detroitnews.com

AkersonGeneral Motors Co. CEO Dan Akerson said Thursday the automaker is closely monitoring the escalating crisis on the Korean Peninsula, has made contingency plans for its employees there and will consider moving production if tensions continue to rise.

“Anything that goes on in Korea is important to our global production,” Akerson said during a live interview on CNBC’s “Squawk Box.”

Detroit-based GM has about 17,000 employees and five plants in South Korea, which annually produce nearly 1.5 million vehicles. Only about 145,000 of those are sold in Korea; the rest are exported to other countries, including the United States.

“You’ve got to start to think about where you have the continuity of supply and safety of your assets and your employees,” Akerson said. “We are making contingency plans for the safety of our employees as best we can.”

But GM is not the only automaker that could be affected if North Korea makes good on recent threats to attack South Korea and its main ally, the United States. Analysts say South Korea is a vital link in the global supply chain that all automobile manufacturers depend on.

“If they do something, if this thing erupts, we’ve got a mess on our hands — and not just from a supply-chain point of view,” said George Magliano, senior principal economist with IHS Automotive

, in an interview with The Detroit News on Thursday.

“Whatever we get out of Korea is going to be put in jeopardy, and we have very little leeway in the short-run of getting around it.”

What most automakers get out of South Korea, according to Jim Hall of 2953 Analytics LLP, is smaller electronic components such as sensors, servos, actuators and wiring connectors. The parts are used by a lot of companies on a lot of different cars and trucks. But Hall said they also can be sourced from a lot of countries if hostilities commence in Korea.

Supply-chain slowdown

“It would obviously affect the entire industry,” Hall said. “It would cause a slowdown of availability, but not stop production in the United States.”

Ford Motor Co. relies on a couple of dozen suppliers in South Korea.

“We continually monitor the external environment as part of our business process,” said Ford spokesman Jay Cooney. “We’re watching the situation closely.”

Chrysler Group LLC also gets some of its parts from South Korea. The Auburn Hills automaker did not respond to requests for comment.

“There’s hardly any Korean sourcing of large components for Chrysler,” Hall said.

But General Motors gets more than just parts from South Korea.

GM Korea’s headquarters, along with important design and engineering facilities, are housed in Bupyeong — only about 20 miles south of the Demilitarized Zone that divides South Korea from the Communist north. Factories there also build the Chevrolet Aveo, Malibu, Captiva and Trax; Buick’s new Encore; the Opel Antara and Mokka; and vehicles sold under the Alpheon brand name.

GM’s Changwon plant in the southeast corner of the country builds light commercial vehicles, while its factory in the western coastal city of Gunsan builds the Chevrolet Cruze and Orlando. General Motors has a transmission

plant in nearby Boryeong.

Jong-un ‘untested, young’

South Korea is also the source of vehicle

kits that are sent to other countries around the world for local assembly.

“We do have outside consulting firms (and) we seek their advice, counsel and try to estimate what’s going to happen,” Akerson said in the CNBC interview. “But quite frankly, it’s kind of like talking about baseball: Who’s going to win the National League and American League this year?”

The GM chief said he did not know what would come of North Korea’s threats, and said he doubts Washington does either. Akerson called North Korea’s 20-something President Kim Jong-un an “untested, young, unseasoned leader,” albeit one who possesses nuclear weapons.

Of course, no automakers have more at stake in the crisis than South Korea’s Hyundai Motor Co. and Kia Motors Co.

Neither company was available for comment at press time.

Magliano said the Korean supply chain is not as fragile as it was just a few years ago. Parts manufacturers there have learned the hard lessons of recent natural disasters in Japan and Southeast Asia, events that took many suppliers out completely.

“They look at what happened with the earthquake in Japan and the flooding in Thailand,” he said. “The Koreans are moving their own production out of Korea. They’re building components where they sell them, including in North America.”


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