* GM drops Chevrolet brand in Europe; to hit S.Koreanproduction
* GM has decided to cease Australian production - reports
* GM Holden exit would threaten Australian auto industry
* PM Abbott calls on GM Holden to clarify position
* Australia, S.Korea just signed free trade agreement
By Hyunjoo Jin and Lincoln Feast
SEOUL/SYDNEY, Dec 6 (Reuters) - General Motors Co mayconsider shipping more South Korean-made cars to Australia, asource said on Friday, as part of a global restructuring thatwill see its Chevrolet brand in Europe dropped and production inAustralia potentially scrapped.
GM, which has been mulling its future in Australia formonths, has decided to pull out as early as 2016, Australianmedia reported on Friday.
One option that would be looked at was to supply Australiausing factories in South Korea affected by GM's announcement onThursday that it will drop the Chevrolet brand in Europe by theend of 2015.
GM Korea shipped 187,000 Chevy cars to Europe last year butthe brand has failed to gain significant share in the market.
"GM Korea could consider exporting Korean-made cars such asthe Cruze compact to Australia if it were to shut down a plantthere," the source, who asked not to be identified because ofthe sensitivity of the matter, told Reuters.
GM Korea has not started discussions on the plan yet, thesource added.
GM Korea last year exported about 30,000 vehicles includingBarina/Aveo subcompact and Captiva sport utility vehicles toAustralia, where they are sold under the Holden badge.
Such a move might face a backlash in Australia, where thereare widespread concerns that any exit by GM Holden will befollowed by Toyota Motor Co, causing a collapse of theentire domestic industry.
"When Holden pulls out of this country, it will be a dominoeffect," said opposition Senator John Madigan, whose state ofVictoria is the one of the major centres for Australia's autoindustry.
"Already car component manufacturers have lost critical masswith the decision of Ford to pull out of Australia. If anotherone pulls out, that's the end, then we're going to be hearingabout Toyota - there are going to be tens of thousands of jobslost."
A spokeswoman for Toyota Australia, which has previouslysaid it expects to make to a decision on its manufacturingfuture in the country in 2014, declined to comment.
AUSTRALIAN PRODUCTION UNDER PRESSURE
Citing unnamed senior government sources, the AustralianBroadcasting Corp said GM had been expected to make anannouncement on its plans to quit Australia this week but hadput it off until early next year.
A GM spokesman in Detroit declined to comment on thereports, while Holden said its discussions with the governmentwere ongoing. Australia's Industry Minister Ian Macfarlane saidno decision had been made.
Holden, which traces its roots in Australia to a saddlemaker in 1856, makes vehicles at its Elizabeth plant in SouthAustralia and engines in Port Melbourne, Victoria, employingalmost 4,000 people and producing around 95,000 vehicles a year.
Australia's auto industry has been under pressure for yearsas high costs, a strong local dollar, weak exports and toughinternational competition take a toll.
In May, Ford Motor Co announced it would shut its twoAustralian auto plants in October 2016, following the exit ofMitsubishi Motors in 2008.
The industry has been propped up by billions of dollars ingovernment support, which has become less certain since PrimeMinister Tony Abbott's conservative coalition won power inSeptember.
"The message we are getting from Holden is they are in twominds and I would like them to clarify what their position is," Abbott told local radio on Friday. "There is not going to be anyextra money over and above the generous support taxpayers havebeen giving for some time," he added.
Adding to the pressure on the industry, Australia onThursday signed a free trade deal with South Korea, cuttingtariffs on imports of cars and car parts.
"You've got to look at the relative size of the industry.Korea pumped out 4.5 million vehicles last year - we did 221,000- so you can imagine the size of their supply chain," RichardReilly, the chief executive of Federation of Automotive ProductsManufacturers said. "They are going to be getting better accessto our market going forward."
Ian Park, an analyst at IHS Automotive, said he expected GMKorea to seek to export more cars to Australia after Chevy iswithdrawn from Europe, boosted by the trade deal.
GM Korea said in a statement that: "The phase-out ofChevrolet in Western and Eastern Europe will increase focus ondriving profitability, managing costs and maximising salesopportunities in Korea."
Even before the FTA, vehicles were Australia'ssecond-largest import from South Korea, worth more than A$2billion last year.
Morgan Stanley analyst Adam Jonas also said the trade dealcould offer opportunities in Australia for GM's Korean-madecars.
"It also serves to put a little pressure on the Koreans. Thecosts in Korea are rising. The labour environment is not thefriendliest in the world," he told Reuters.
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- Budget, Tax & Economy
- GM Holden
- South Korea