General Motors is under pressure to clarify its plans for the future of a key manufacturing hub in South Korea, as the country’s trade talks with the Trump administration to mitigate steep car tariffs remain unresolved.
GM Korea’s two carmaking plants produce affordable compact vehicles, principally for the North American market, accounting for nearly 17 per cent of the group’s US vehicle sales.
That puts the Detroit auto company at the heart of Donald Trump’s trade war, with executives counting on Washington to strike a deal with Seoul that would lower a 25 per cent tariff imposed in April.
If talks fail, analysts say it would require a major rejig of GM’s global manufacturing footprint, following retreats from Europe, Vietnam and Australia in the past decade.
The company warned in May that Trump administration tariffs could reduce its adjusted profits by up to $5bn this year, of which $2bn would be due to tariffs imposed on vehicles imported from South Korea.
“We’re very worried about the possibility of GM’s exit from Korea,” said Ahn Kyu-baek, leader of GM Korea’s labour union, which is threatening a walkout over pay and management’s plan to close down local service centres and sell off underused land and assets.
GM Korea was established in 2002, following the group’s acquisition of the carmaking assets of the bankrupt Korean conglomerate Daewoo, in the aftermath of the Asian financial crisis of the late 1990s.
However, the business has long struggled with rising labour costs, as well as overcapacity resulting from GM scaling back its global ambitions in the wake of the global financial crisis in 2008. In 2018, GM Korea received a bailout from the South Korean government in the form of a capital injection from the state-owned Korea Development Bank (KDB).
Ahn said General Motors had made a commitment to stay in Korea for the duration of the 10-year bailout deal. “They may not leave the country immediately, but they seem to be preparing to leave in 2028 after their agreement with the KDB expires,” he said.
GM Korea declined to comment on speculation about the company’s future. The carmaker and the Korea Development Bank both declined to comment on the contents of the 2018 bailout agreement.
Driven by the popularity of its compact Chevrolet Trax Crossover and Trailblazer models in the US, GM Korea sold 499,559 vehicles in 2024, its highest total since 2017 and a 6.7 per cent increase over the previous year, despite domestic sales in Korea falling by 36 per cent.
Overall sales have since declined by more than 7 per cent in the first five months of 2025 compared with the same period last year. However, at a Bernstein conference in late May, Paul Jacobson, GM’s chief financial officer, said the company would not rush to make a long-term decision on its Korean operations, saying it was hopeful tariffs would be reduced.
“The business we have over there is really strong. The vehicles have probably never been better in terms of what we’re bringing over. And I think there’s still a lot of opportunity there,” he said.
A tariff deal has proved elusive, however. This month, Yeo Han-koo, South Korea’s trade minister, repeated Seoul’s call for the removal of US tariffs on South Korean auto imports, after the two countries failed to reach an agreement ahead of a US deadline. The talks are being extended with a new deadline of August 1.
Kim Pil-soo, professor of auto engineering at Daelim University in Seoul, noted GM Korea had enjoyed limited success in the South Korean market, with 85 per cent of its output sold in the US. That has left it even more exposed to tariffs than fellow Korean carmakers Hyundai and Kia, both of which have a manufacturing presence in the US.
“If the 25 per cent tariffs are maintained, GM Korea can’t survive and the factories will be closed,” said Kim. “If, however, tariffs fall below 10 per cent, GM can absorb the shock by raising prices and cutting costs.”
Dan Levy, an equities analyst at Barclays, wrote in a research note that, of the three big Detroit-based carmakers, “GM would see the most negative impact from an ‘unfavourable’ trade deal with South Korea”.
“We suspect [GM Korea’s] vehicles are uneconomical with the current auto tariff policy, yet GM’s continued import of such vehicles is likely a reflection that they expect a trade deal ahead with Korea,” he added. “We believe this deal could, however, take longer than expected.”
A GM spokesperson said: “We continue to monitor closely discussions between the Korean and US governments around trade policy.”
GM is also vulnerable to tariffs affecting its operations in Canada and Mexico, where it makes about half the vehicles it sells in the US.
Analysts note that, as an American automaker importing large numbers of vehicles from abroad, GM would have to weigh cost considerations against the wider risk of incurring the displeasure of a Trump administration determined to bring auto manufacturing back to the US.
But Lee Ho-geun, professor of future vehicles at Daeduk University in Daejeon, said that, with the cost of producing smaller cars up to 40 per cent higher in the US than in South Korea, GM could be persuaded to maintain their Korean presence even if steep tariffs were to remain — especially if they were to be offered fresh inducements by Seoul.
Lee said that, while Korea still had its merits as a production base, “GM’s biggest difficulties in doing business in Korea are unstable labour relations, increasing labour costs and regulatory uncertainties”.
But he added it would not “make economic sense to produce small-size SUVs in the US or Mexico, because wages are too high in the US and Mexico is not free from tariffs either”.
