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General Motors to Trim South Korea Business, Focus on Profit

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General Motors Company GM announced to shut down one of its four plants in South Korea as a part of restructuring its business in Asia, per Reuters. This is likely to cost the auto giant up to $850 million, which includes around $475 million of non-cash asset impairments and up to $375 million of employee-related cash expenses. The automaker has further added that it would take a decision on the future of the remaining operations in South Korea within weeks.

The restructuring move is in sync with the automaker’s recent strategy of giving more emphasis on profitability and innovation than on sales and volume. In fact, since 2015, General Motors has shed unprofitable business in Europe, Australia, South Africa and Russia.

For years, South Korea remained a low-cost export destination for General Motors. During its peak time, South Korean operations produced around 20% of its global output. However, in recent times, with the steep rise in labor expenses, the decline in the demand for sedans and huge investments made in China, have severely hurt the competitiveness of South Korean business.

The latest shutdown in South Korea is a part of its broader Asia business restructuring. In recent times, the auto giant stopped manufacturing in Australia and Indonesia and also its operations in Thailand have been restructured.

Over the past six months, shares of this company have outperformed the industry it belongs to. The stock has grown 18.5% against the industry’s rise of 0.1%.

Currently, General Motors carries a Zacks Rank # 3 (Hold).

Some better-ranked stocks in the auto space are PACCAR Inc. PCAR, Genuine Parts Co. GPC and Lear Corp. LEA. While PACCAR sports a Zacks Rank #1 (Strong Buy), each of Genuine Parts and Lear has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here..

PACCAR has an expected long-term growth rate of 10%. In the last six months, shares of the company have gained 4.7%.

Genuine Parts has an expected long-term growth rate of 7.2%. Shares of the company have rallied 16.7% in the last six months.

Lear Corp has an expected long-term growth rate of 7.1%. In the last six months, shares of the company have jumped 30.8%.

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