GM Korea Threatens Bankruptcy If Union Doesn't Budge

Steph Willems
by Steph Willems
gm korea threatens bankruptcy if union doesnt budge

South Korea’s powerful labor unions have the ability to make vehicle assembly a non-starter, and the country’s workers have been known to strike like it’s going out of style. Just ask Hyundai about that.

As it seeks to bring its operations in the country back from the brink, General Motors would prefer to see its workers’ union bend to its will, agree to the concessions demanded of it, and generally get out of the way. This isn’t happening, so GM’s now playing hardball.

Agree to our cost-cutting plan, the automaker says, or GM Korea declares bankruptcy.

The union’s deadline is April 20th. GM clearly hopes the tactic cows labor brass, thus speeding up the delivery of a government aid package and ensuring the flow of lower-end GM vehicles not only to South Korea, but to export markets like the United States.

According to Reuters, GM International president Barry Engle told the division’s union boss that GM must find $600 million in operating funds. Without it, it can’t craft a renewal plan to present to the government by the target date, resulting in bankruptcy. Part of that plan involves reaching a new wage deal with workers — one that cuts benefits to the tune of roughly $80 million.

Already, 15 percent of GM Korea’s workforce has applied for a redundancy package offered as part of the automaker’s restructuring efforts. More packages might follow — the automaker apparently wants to pare its workforce down by double that amount. Last month, the division announced the closure of an underperforming assembly plant, one of four it operates in the country.

For its part, the union claims it doesn’t want a wage increase or the handing out of bonuses this year, but it does want job security. Knowing GM’s future product plans would go a long way towards placating union brass.

GM Korea builds the Chevrolet Spark, Sonic, and Trax for North American consumers, as well as the Buick Encore.

[Image: General Motors]

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  • Bd2 Bd2 on Mar 27, 2018

    What has plagued GM Korea (aside from just overall poor management) has been the perfect storm of a no. of factors. Poor product portfolio (c'mon - the Spark, Sonic, Trax/Encore and a couple of others), Chevy's pull-out from Europe, the ever increasing wages for the auto workers in SK, the high valuation of the Won, GM Korea's debt load to GM. The South Korean Development Bank is a minority shareholder in GM Korea; it'll be interesting to see if the Korean govt. decides that it simply isn't worth it to pump more $$ into GM Korea when the likelihood is that GM will pull out completely eventually.

    • Aquaticko Aquaticko on Mar 27, 2018

      There should definitely be some further investigation into the claims that GM led to GM Korea at above-market rates. The South Korean government was smart to break up Daewoo in the '97 financial crisis; however, leaving the entire country's automotive industry in the hands of basically one company was always going to be a mistake.

  • BOF BOF on Mar 28, 2018

    Actually, the Sonic is made at the Orion plant. In fact, it’s the only subcompact made in the USA.

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