With labor costs set to rise in South Korea, wage negotiations between management and employees inside GM Korea may be “the most critical negotiation” the subsidiary has ever faced.
Bloomberg reports the rising costs are the result of the nation’s Supreme Court ruling last December that bonuses and other compensation were to be included in the base pay of an employee’s annual earnings. The ruling means a total of 13.75 trillion won ($13.5 billion USD) will be added to current labor costs, which GM Korea CEO Sergio Rocha claims won’t be good for his company, the local automotive industry, or “Korea Inc.”
Speaking of the won, Rocha also voiced his concerns about the strengthening currency as it undermines profits from exports to countries, including Australia and Germany. The won is trading around 1,020 to $1 USD. Hyundai’s Korea Automotive Research Institute issued a forecast earlier this week that the currency will rapidly appreciate during the second half of 2015, a forecast Rocha believes to be higher than GM Korea’s own prognostication:
We see an appreciation, but not at that level. Korea has many big exporting conglomerates and I don’t think the economic group of President Park will allow this to get derailed.