By on May 30, 2014

GM Korea Bupyeong Plant

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.

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14 Comments on “GM Korea Faces Critical Wage Negotiations Amid Rising Won, Labor Costs...”

  • avatar
    schmitt trigger

    “Speaking of the won, Rocha also voiced his concerns about the strengthening currency as it undermines profits from exports to countries”

    All it will take is for Kim Jong Un to launch another missile and to change his haircut, and the Won will take a nosedive. Check the following story:

    Now seriously, where have we heard this before??? Aaaah, Japan! South Korea’s economic arch-enemy.

  • avatar

    That false color shot is some depressing imagery. When a GM factory is the only source of vibrancy and life, abandon all hope ye who enter there.

  • avatar
    schmitt trigger

    You have a point;
    imagine being a tenant in one of those high-rise condominiums, and instead of facing a lake, a forest or a beach, imagine facing A GM factory

  • avatar

    Is that Seoul? Is there like a 15-story cap on buildings there?

    Looks like they turned their central park into a Chevy factory.

    • 0 avatar

      No, that’s Incheon, which is to Seoul as Jersey is to NYC.

      • 0 avatar

        Thanks. Looked at a map.. no wonder MacArthur invaded there.

        I’ve got to learn something about that country. If anything, their progress seems more explosive and impressive than Japan’s.

        • 0 avatar

          But I’d take most of those Goldman Sachs predictions with a grain of salt because the South Korean economy is bound to implode at some point due to the upside down population pyramid.

  • avatar

    So the difference is that they’re supposed to account for bonsues and other compensation as “pay” instead of “miscellaneous expenditures” and that’s causing a spike in labor costs? How about a press release instead that says “We’re going to stop lying about this now.”, or would that cause too many people to question what else they’re lying about? Like maybe the fact that this is not a spike in costs, and that if profitability is taking a hit the blame lies elsewhere.

  • avatar

    GM will just do what every other auto makers does over time.

    They’ve pulled the plug in Australia to move production to Korea and Thailand.

    When South Korea becomes too expensive they’ll move to Thailand and China. If they become too expensive the next up-and-comer might be the Philippines, Indonesia, or Malaysia.

    When that becomes too expensive the next destination might by then be some slightly better developed African coastal nation not named South Africa (which will be too expensive by then).

  • avatar

    Am I the only won whose first impression was that the GM factory complex closely resembles a circuit board?

  • avatar
    Big Al from Oz

    The auto workers in Korea should sit down and carefully consider what they are doing.

    Unions generally are quite poor at looking into the future. What are the Korean auto workers going to confront in the next decade?

    1. Cheaper logistics and more FTAs; this will encourage the importation of products.

    2. More competitive labour; China, Thailand and even Chile, India.

    3. Robotics; extreme automation will provide competition of machine vs human costs.

    4. Politics; It seems many of the large auto makers bed with those who are prepared to use taxpayer dollars to support them.

    So, if you look at Sth Korea you will see it is in no different a position than any other country, globally.

    The Korean auto workers are quite militant, sort of like the UAW. Maybe they should look at Detroit and the involvement the UAW had in it’s demise.

    If the Korean auto workers, look outside of their backyard and accept the changes globally they would make better decisions, unlike the UAW.

  • avatar

    This does fit tha pattern of most industrialized nations.

    Industrial leaders have power.

    Workers are exploited.

    Workers unit.

    Workers have power.

    Workers and leaders fight for power.

    Workers and leaders f^ck it all up.

    Country f^cked.

    It srarts all over someplace else.

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