[The Editors' Verdict] POSCO Also Worries Amid Rumors of GM Korea's Withdrawal

"Is GM Korea really planning to withdraw from the country?"

This was a question posed with concern by a senior executive at POSCO during a recent informal meeting with this reporter. At the end of last month, GM Korea announced it would sell nine directly operated service centers nationwide, including those in Seoul and Busan, and instead support customers through partner maintenance centers. The company also began asset restructuring by selling parts of its main production facility and land at the Bupyeong plant. These actions led to speculation that GM Korea was taking steps to exit the domestic market.

This executive's concern about GM Korea's potential withdrawal stems from the risk of losing a major domestic client. He lamented, "If GM Korea does withdraw, our sales will inevitably be significantly affected." The situation has become even more sensitive as it has already become extremely difficult to secure profits due to the influx of Chinese steel and the 50% steel tariff imposed by the United States. Now, with GM Korea selling off some of its assets, concerns have intensified.

In the automotive steel sheet sector, GM Korea is one of POSCO's key clients. Automotive steel accounts for 30% to 35% of POSCO's total steel sheet sales. According to the Korea Automobile & Mobility Association, GM Korea produced 494,072 vehicles last year. While this number is behind Hyundai Motor (1,857,856 units) and Kia (1,548,219 units), it is still significant considering GM Korea operates as an overseas production facility for GM. Moreover, Hyundai Motor and Kia also source steel sheets from Hyundai Steel, which is part of their own group. Given that approximately one ton of steel sheet is used per mid-sized vehicle, GM Korea's annual steel sheet demand is estimated at around 500,000 tons. From POSCO's perspective, GM Korea is a client it cannot afford to lose.

Of course, looking solely at GM Korea's income statement, the likelihood of an immediate withdrawal appears low. According to the 2024 audit report, GM Korea posted an operating profit of 1.3572 trillion won last year. This was largely due to strong exports to the U.S. market.

However, this positive trend is expected to change significantly this year. The Donald Trump administration's decision to impose a 25% tariff on imported cars is a decisive factor. Nearly 90% of GM Korea's total production is exported to the U.S., making the company heavily dependent on the American market. In particular, the company's main export models, such as the Trax Crossover and Trailblazer?both compact SUVs?are highly price-sensitive. It will be difficult to expect a repeat of last year's strong performance. Fundamentally, the weak domestic situation is also fueling speculation about a possible withdrawal. GM Korea's domestic sales totaled 24,824 units, a decline of more than 10,000 units compared to the previous year's 38,755 units.

Despite explanations from General Motors (GM) headquarters, speculation about GM Korea's withdrawal remains ongoing. When it closed the Gunsan plant in 2018, GM Korea signed an agreement with the Korea Development Bank to maintain its domestic operations until 2028, but there are no clear plans beyond that.

This is why POSCO is feeling uneasy. If domestic manufacturing investment were robust, alternative demand could be found, but that is not the reality. According to statistics from the Export-Import Bank of Korea, overseas investment by domestic manufacturing companies reached $63.4 billion in 2023. In contrast, the Ministry of Trade, Industry and Energy reported that last year's foreign direct investment (FDI) amounted to $34.57 billion, just over half that figure. Although this was a record high, it still means more companies are building factories overseas than investing domestically. Furthermore, the actual investment amount carried out under contracts was the lowest in the past four years. While attracting investment is important, it is also essential for the Korean economy to ensure that companies do not pack up and leave.