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(LEAD) (News Focus) Will GM Korea keep cruising on new Cruze?

2016/11/24 09:04

(ATTN: RECASTS 4th para from bottom to verify GM has withdrawn most, not all, Chevrolet vehicles from the European market)

By Byun Duk-kun

SEOUL, Nov. 24 (Yonhap) -- GM Korea Co., the South Korean unit of U.S. automaker General Motors Co., is expected to introduce the new Cruze compact car early next year, and the launch will likely bring both a challenge and chance for the carmaker and its relatively new chief James Kim, market observers noted Thursday.

GM Korea has had a record year so far, partly helped by the launch of the All New Malibu midsize sedan in late May, with its local market share expected to breach the 10-percent mark for the first time in nearly a decade.

In the first 10 months of the year, GM Korea sold 144,726 cars in South Korea, up 12.5 percent from the same period last year and accounting for 11.2 percent of all vehicles sold by the five passenger car manufacturers.

Also in terms of all vehicles sold, including commercial trucks and buses, GM Korea's market share came to 9.7 percent as of end-September, just shy of a 10-percent share that will mark the company's first double-digit market share since 2009.

Such an increase in sales was partly attributed to brisk sales of the Malibu, which has already sold more than 30,000 units, compared to 16,382 units sold in all of 2015.

GM Korea apparently seeks to repeat such success with the launch of the new Cruze early next year.

James Kim, CEO of GM Korea (Photo courtesy of GM Korea) James Kim, CEO of GM Korea (Photo courtesy of GM Korea)

And the successful launch of the Cruze and its continued success in the local market will be the first real challenge for Kim, CEO of GM Korea, who took the office about a year earlier, according to market observers, who noted the Malibu and its enormous success had rather been handed to Kim as its launch may have been planned long before he took the position.

The Cruze will be the first Chevrolet vehicle to have been planned and launched under Kim's leadership, they said.

However, there remains a large problem for GM Korea in mimicking its own success with the Malibu.

"As GM Korea advertises the Cruze as 'my first identity,' the Cruze is what we call an entry car, largely meaning it is affordable to anyone and especially young, first-time car owners," a local expert said, asking not to be identified.

"The problem is the Cruze may not be so affordable, and less so than its competitors," he added.

The Chevrolet Cruze (Photo courtesy of GM Korea) The Chevrolet Cruze (Photo courtesy of GM Korea)

The Cruze currently has a lineup of 10 models under three separate trims, and has a price range of 17.5 million won to 23.67 million won (US$14,920-$20,180).

Its largest rival and local leader, the Avante from Hyundai Motor Co., has a lineup of 18 models under four separate trims that carry an initial price tag of between 14.1 million won and 24.55 million won.

The lowest price of the second best-selling compact car, the K3 by Kia Motors Corp., is set at 13.95 million won.

In the January-September period, the Chevrolet Cruze sold 7,614 units, down nearly 40 percent from 12,654 cars sold over the same period last year, according to data from GM Korea.

Sales of the Hyundai Avante spiked 9.8 percent to 70,310 over the cited period. Sales of the Kia K3 dropped 14.5 percent on-year to 27,487, but its gap with the Cruze further widened to nearly 20,000 units.

"People will consider the value of a car when purchasing a new car, but the sheer price is often the most important factor in deciding which car to buy especially to those who do not have enough to spend and therefore are looking to buy a small vehicle, or an entry car," the expert said.

The Malibu, on the other hand, has remained the best-selling car in its segment from June to September, except in August, apparently helped by its market positioning in terms of price.

The Malibu has the lowest price of 23.88 million won, while its main local competitors -- the Hyundai Sonata and the SM6 of Renault Samsung -- both have a starting price of 24.2 million won.

Dale Sullivan (R), vice president of vehicle sales, service and marketing at GM Korea, poses for a picture with a South Korean customer, who purchased the 30,000th unit of the All New Malibu sold in South Korea on Nov. 16, 2016. (Photo courtesy of GM Korea) Dale Sullivan (R), vice president of vehicle sales, service and marketing at GM Korea, poses for a picture with a South Korean customer, who purchased the 30,000th unit of the All New Malibu sold in South Korea on Nov. 16, 2016. (Photo courtesy of GM Korea)

The success of the new Cruze will also be a great challenge for GM Korea as a whole, or at least for some 2,000 workers at the company's production facility in Gunsan, North Jeolla Province.

As the only plant out of the company's four production facilities in the country that produces compact cars, including the Cruze, the Gunsan plant saw its output sharply drop shortly after General Motors decided to withdraw mainstream Chevrolet cars from the European market in late 2014.

In the first eight months of the year, the Gunsan plant was put to work only on 76 out of the total 238 days available, giving its 2,000 employees only one or two days to work each week and significantly reduced monthly salaries, according to its labor union.

An increase in sales of the Cruze following the launch of the refreshed model in 2017 may help ensure the continued success of GM Korea, but a failure may spell trouble for the company and its 2,000 workers at the Gunsan plant, who already fear a possible shutdown.

"The company hopes the new Cruze will help revitalize the country's overall compact car market as the Malibu did for the midsize sedan segment, and also help revitalize the Gunsan plant," a GM Korea official said, while speaking on condition of anonymity.