By on March 27, 2018

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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10 Comments on “GM Korea Threatens Bankruptcy If Union Doesn’t Budge...”


  • avatar
    Sub-600

    Maybe South Korean taxpayers will bail the general out. Good grief.

  • avatar
    SCE to AUX

    In this Mexican standoff, GM China will win.

    • 0 avatar
      NN

      Yes. The Encore/Trax is already made by SAIC, and we’ll surely be getting them from there on the same boat as the Envision soon. GM Korea’s buyouts are very generous, the Korean employees should see the writing on the wall.

  • avatar
    don1967

    It cost Walmart a bundle in legal settlements to shut down one of its Quebec stores in 2005, after employees voted for unionization. But in the long run it was cheaper than the alternative.

    Sometimes the only way to cure tree disease is with a saw.

    • 0 avatar
      redapple

      don

      perfectly said. with an economy of words.

      • 0 avatar
        nrcote

        The anti-union comments are typical around here. No imagination whatsoever. Sad.

        • 0 avatar
          aquaticko

          Normally I’d agree, but the Korean automotive industry’s unions are notoriously disproportionate. Taking longer to manufacture a vehicle without a notable increase in quality is hard to justify, especially when e.g. Hyundai’s Ulsan plant workers make an average of 80k USD a year.

          Until Korea’s automotive industry becomes substantially more than just Hyundai and its subsidiaries, it won’t survive–much less flourish–when every other major automotive country has a larger domestic base to work with.

  • avatar
    bd2

    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.

    • 0 avatar
      aquaticko

      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.

  • avatar
    BOF

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

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