Government faces risks in supporting GM Korea amid US tariff threats

Solid exports might entice US carmaker not to withdraw

By Lee Min-hyung

The government might have to inject more capital into General Motors (GM) Korea in an attempt to block the carmaker from exiting the market amid escalating tariff threats from the United States, experts and industry officials said Monday.

The concern is surfacing as U.S. President Donald Trump threatens to impose a 25 percent tariff on all vehicles imported to the world's largest economy on April 2. Under the scenario, GM Korea is feared to fall victim to the U.S. policy, as its headquarters uses Korea as a key base for its U.S. exports. GM Korea’s exports to the U.S. account for 83.8 percent out of its total production here.

If Trump follows through with his threats, GM Korea is expected to turn to a deficit and initiate an exit strategy as soon as possible to minimize further losses here.

The government does not want the carmaker to withdraw its operations here, as the scenario does no good to the local economy. GM Korea employs some 11,000 workers, and thousands more subcontractors would also be affected by its possible exit.

Last week, Deputy Ministry of Trade Park Jong-won held a closed-door meeting with GM Korea officials. Neither side shared details of the talks, but it is widely believed that the issue of Trump’s tariff threat was likely discussed.

In 2018, GM Korea pushed for a withdrawal from the country, but decided to reverse the decision after the state-run Korea Development Bank agreed to inject 810 billion won ($557 million) into the carmaker with the condition of GM Korea maintaining operations for a decade at its two manufacturing facilities in Incheon’s Bupyeong District and Changwon, South Gyeongsang Province.

“GM Korea may justify the need for more financial support from the government, citing the tariff risk from the U.S.,” said Kim Pil-soo, an automotive technology professor at Daelim University College.

“However, this is not a step in the right direction in terms of efficiency. GM Korea has gradually increased its portion of exports in recent years, rather than boosting domestic sales, which made it easier for the carmaker to leave the Korean market.”

According to data from the Korea Automobile & Mobility Association (KAMA), sales for GM Korea reached some 494,000 vehicles last year, but only 5 percent of them were sold in Korea.

The expert also urged the government not to follow a similar path again, which would be unfair from the perspective of other carmakers.

Kim Moon-tae, head of the industry policy division at the Korea Chamber of Commerce and Industry, said the government should remain cautious over the agenda.

“This will draw a strong backlash from other carmakers and companies in every corner of industry, and the government will be severely criticized for its unfair financial support,” he said.

Industry officials said it would be tough for GM to decide to close its operations in Korea in a short period of time due to its solid and stable production capabilities.

According to data from GM, the carmaker reported global sales of over 6 million vehicles in 2024, with production from its Korean facilities accounting for 8.3 percent of the total.

“GM Korea is on track to solidify its position as a major production base, as evidenced by its solid export figures. As a result, the carmaker will leave open diverse negotiating cards with the government to continue its operations here,” an official from the industry said.