GM Korea suffered a record operating loss of 800 billion won ($736 million) last year, further aggravating its high number of debts largely due to a strategy shift by its head office, according to provisional data submitted by the carmaker.
The local unit of the US carmaker suggested the estimated figures to the government while asking for cash last month.
Data showed that the company posted annual losses for four straight years. In 2014, GM Korea saw 148.6 billion won in operating loss, followed by 594.4 billion won in 2015 and 531.2 billion in 2016.
GM Korea posted 10.7 trillion won in sales last year, the lowest after the 2008 global financial crisis.
GM`s Gunsan plant in North Jeolla Province, South Korea (Yonhap)
The Korean government views that GM’s withdrawal from global markets -- from Europe to South Africa -- has triggered snowballing deficit for GM Korea.
Its decision to pull out its Chevrolet brand from Europe has hit GM Korea majorly, officials said. The region had been a major export destination for the company.
More than 137,000 cars manufactured at GM Korea’s plants headed for Europe in 2012, but the number dropped to 61,954 in the following year. Last year, the company shipped only 205 cars to the region.
GM Korea has been manufacturing mostly compact or mid-sized sedans so far. But the company may have lost ground in GM’s global operation, as it heavily invested in large sport utility vehicles and pickups in recent years, according to officials at the state-run Korea Development Bank.
They also highlighted the lack of transparency in management as triggering the snowballing deficit, citing the company’s high ratio of sales prices to costs.
GM Korea’s ratio of cost of sales stood at 93.1 percent in 2016, higher than other local carmakers. The figure for Hyundai, Kia and SsangYong hovered around 80 percent, according to Rep. Ji Sang-wook of the Bareun Future Party.
High interest rates the local unit paid to its headquarters for money borrowed, and its research and development spending, also appear to have aggravated the situation, officials said.
GM Korea is an unlisted company in Korea and has no obligation to report its finances. Its second-largest shareholder, KDB, with a 17 percent share, said it had started to review the company’s finances through a local accounting firm.
By Cho Chung-un (email@example.com