General Motors Co.‘s (GM) South Korean division said that it would suspend the production of its new Trailblazer sport-utility vehicle (SUV), throughout May as the COVID-19 outbreak significantly reduced U.S. exports, and disrupts part supplies.
GM Korea supplies some of GM’s compact SUVs to the U.S. market. As consumers shift away from sedans, GM Korea considers the Trailblazer model with strategic importance. The company said that the SUV model, as a global export model, is necessary for the automaker’s mid to long-term survival.
In 2018, South Korea invested 916.4 trillion won ($750 million) in government aid to General Motors with a promise of using the country as a manufacturing base. The Trailblazer stands as the company’s undertaking of the deal.
GM Korea, on Monday, temporarily shut down production at its Bupyeong plant No.1 in Incheon, near Seoul. According to Reuters, the company showed its internal production plan to run the plant for the next seven business days and place “temporary production stops” throughout the rest of the month.
A GM spokesperson said that the company expects further disruptions due to the impact of the coronavirus on parts procurement and sales in the U.S. The spokesperson added that the temporary production stops in May are still subject to change.
The South Korean automaker began manufacturing the Trailblazer last January and shipping to the U.S. in February. However, the spokesperson said the sale of the model has yet to start, and its planned debut last April in the U.S. halted as the government imposed lockdowns.
Currently, GM sells the compact SUV in the South Korean market only.
Virus-Induced Manufacturing Disruptions
According to the company, if the shutdown period lasts longer than 11 business days, employees would receive 80 percent of their average wage. However, if the shutdown ends within 11 business days, compensation would decline to 70 percent of their average salary.
GM Korea acquires its wiring harnesses from the Philippines, but measures placed by its government against the virus disrupted the supply of the parts.
South Korea’s export-reliant economy has since managed to control the situation after recording some of the earliest cases of virus infections. The country’s response led to manufacturers resuming their production, however, disrupted due to reduced overseas demand.
According to Korea’s Ministry of Trade, Industry, and Energy, the nation’s total exports shrank 24.3 percent in April compared to the same month a year earlier. Data from the ministry showed a 36 percent drop on vehicle shipments and a 50 percent fall on vehicle components.
Other major South Korean automakers such as Hyundai Motor and Kia Motors also experienced temporary production stops due to virus-induced parts manufacture from China and Southeast Asian countries.