GM May Trim Production in Korea as Sales Slow

General Motors Co. says it could further cut output at its factories in South Korea to match shrinking demand for their exported small cars.

Stefan Jacoby, who heads GM International, tells reporters its Korean plants already are running at only 60% of capacity, well below the 80% considered necessary to produce a profit.

The facilities make small cars marketed internationally under the Chevrolet brand. But volume has been hurt by GM's phase-out of the marque in Europe and the collapse of the Russian car market, where Chevy sales are down 56%.

Jacoby's warning comes two months after GM and its union workers in Korea agreed to a new one-year contract. A key part of the deal is a company commitment to add production of Chevrolet Malibu midsize sedans. Jacoby notes the only option GM has to layoffs is to find new models for its Korean plants to build.

IHS Automotive predictst GM's annual output in Korea will drop to 365,000 vehicles by 2025 from 630,000 in 2014, mainly because of a 50% jump in Korean labor costs. A Reuters report in May suggested GM plans to develop India as its new Asian export hub.