The Korean arm of General Motors Co. (GM), GM Daewoo Auto & Technology Inc. or GM Korea Co., announced that it will reduce output at two of its three plants in South Korea on the back of parts shortage due to damages caused by earthquake and tsunami in Japan.. The automaker will reduce overtime at the plants, leading to a loss of 10% of production from its current output of 70,000 to 80,000 units each month.
GM Daewoo is the third largest automobile manufacturer in South Korea. The company has five manufacturing facilities in Korea and an assembly facility in Vietnam. GM owns 70.1% of the company while other stakeholders including Korean Development Bank, Suzuki Motor and Shanghai Automotive Industry Corporation own 17%, 6.8% and 6%, respectively. GM Korea fulfils 4% of its auto parts requirement through imports from Japan for its two models, Chevrolet Spark mini car and the Chevrolet Cruze sedan.
GM’s decision followed the similar move taken by Renault SA’s South Korean subsidiary, Renault Samsung Motors Corp., which plans to curtail overtime hours at its Busan plant due to the parts shortage problem.
Global automakers has been experiencing low auto parts inventories due to the earthquake and tsunami that killed about 10,000 people and damaged roads, ports and bridges.
Due to the natural disaster, Toyota Motor Corp. (TM) continues to suspend production at 5 of its 12 wholly owned as well as its other partly owned plants till March 22. It has started production of auto parts at 7 domestic plants last Thursday.
Meanwhile, Nissan Motor Co. (NSANY), which has suspended production until March 20, plans to restart its operations, although at less than full capacity. Honda Motor Co. (HMC) revealed that it will continue to suspend automobile and motorcycle assembly operations through Wednesday.
Last week, GM announced that it would temporarily shut down its pick-up truck plant in Louisiana for the same reason. The plant, which produces Chevrolet Colorado and GMC Canyon, will remain closed for this week.
GM, a Zacks #3 Rank (Hold) stock, posted a profit of 52 cents per share in the fourth quarter of 2010, exceeding the Zacks Consensus Estimate by 5 cents per share. The results excluded net charges of $0.4 billion due to the previously disclosed $0.7 billion loss on the purchase of U.S. Treasury preferred shares.
In absolute terms, the company turned a profit of $510 million during the quarter in sharp contrast to a loss of $3.52 billion in the comparable quarter of 2009 driven by the recovery in the North American and European automotive markets.
The automaker generated revenues of $36.9 billion during the quarter, which was higher than the Zacks Consensus Estimate of $34.9 billion. Unit sales escalated 11% to 2,173 vehicles from 1,952 vehicles in the fourth quarter of 2009. The automaker occupied a market share of 11.5% during the quarter, up from 11.4% in the year-ago quarter.
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