GM Korea announced that it would close its Gunsan plant.

GM Korea announced that it would close its Gunsan plant.

GM says the reason for the closure is because of financial difficulties.

GM Korea's accumulated deficit amounts to 2 trillion won from 2014 to 2016 and is said to have made a deficit of more than 600 billion won last year.

GM Korea makes more cars for export than cars for the domestic market, but its decision to pull out of Europe has significantly decreased its running rates. Among them, Gunsan plant seems to have dropped more than 20 percent.

In the end, GM Korea's deficit is more of a managerial judgment problem at GM headquarters than at home. GM Korea is likely to have made a production cut to avoid a deficit.

The headquarters of GM Korea, which is in deficit, provides 4.4 trillion won in operating funds, and the interest rate is said to be five percent. Interest earned by GM headquarters alone for four years is said to be worth 460 billion won.

Considering that U.S. interest rates were low at less than 5 percent at that time, many are speculating whether they might have lent money to Korea and played an interest game.

In addition to the interest issue, GM in Korea is also blamed for the excessive amount of research and development.

As of 2016, GM Korea has reportedly spent 614 billion won on research and development.

That year, however, the loss was 522 billion won, about 92 billion won less. It is usually common sense to reduce R&D spending when the deficit grows. It is also pointed out that GM Korea is spending too much on research and development mainly to make half-manufactured cars, rather than finished cars. For your information, Renault Samsung Motors ` research and development costs last year were 150 billion won.

In addition, it is reported that the company pays more than 100 billion won per year in various expenses and royalties to its U.S. headquarters.

GM headquarters is asking for Korea`s support by taking away other affiliates of GM Korea. There is a history of net buying at Australia's government support and it is suspected of being willing to normalize it.

For this reason, the government has apparently judged that it is necessary to conduct a due diligence before the aid is granted. However, it is questionable whether the prosecution will cooperate with them to conduct the inspection.