GM Says Labor Disputes Are Making South Korea Look Unmanageable
Over the last few years, General Motors has been cautiously hinting that it wants to pull out the Korean market. In 2018, the automaker started worrying about regional bankruptcy and shuttered one of its South Korean facilities after noting that labor costs had been on the rise. While the government handed GM 850 billion won ($712.85 million) in industrial aid to stick around, the region is known for labor disputes. We even celebrated the fact that South Korean Hyundai failed to strike in 2019. General Motors was less fortunate, however.
The Detroit-based company is once again discussing abandoning the market and citing labor issues as the primary cause. Employees have been organizing limited daily strikes since October 30th. Despite only lasting part of a single shift, it’s impacting production and will only end once the automaker ends a wage freeze enacted during the aforementioned deal in 2018.
From Reuters:
That blow to production was on top of the 60,000 units lost earlier in the year as the novel coronavirus spread, making it likely GM Korea would not turn a profit this year unless it could recapture that output, he added.
“We’re basically being held hostage in the short term by lack of vehicle production,” Kiefer said in a telephone interview. “That’s having a very significant short-term financial impact.”
The industrial action would “basically make it impossible for us to allocate any further investments or … new products to the country of Korea. It’s making the country non-competitive”, he said.
“It is going to have long-term effects if we can’t get this resolved in the coming weeks.”
The union is demanding to maintain one-year contracts and a yearly performance bonus of 22 million won ($19,900). It would also like the automaker’s assurance that two plants in Bupyeong will be allocated product so they can remain open and there’s been a push to transition contracted workers into full-time employees.
“We are not only striking over wage issues, but also over job security at our No. 2 plant in Bupyeong, which hires about 1,200 workers,” said union official Jung Jai-heon, who added negotiations haven’t gone as well as anticipated.
GM wants to move toward two-year labor deals and has offered signing bonuses of 8 million won ($7,230) for each union member over the next two years. But we’re inclined to believe it wants to pull out of the market (or at least streamline it heavily) after posting an operating loss of 332 billion won ($300.8 million) last year. While less serious than losses incurred in 2018, it’s not what GM wants to see when 2020 is guaranteed to be a financial disaster.
Fortunately for the region, the automaker cannot legally divest from South Korea for ten years after accepting government handouts in 2018. But GM isn’t exactly bending over backward to support local operations. Numerous programs have been cut as strikes continue. We envision the company giving Korea the bare minimum to adhere to legal obligations and shifting whatever operations it can to China over the next few years.
[Image: General Motors]
A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.
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Well the South Korean Government did a similar thing when they asked Hyundai to step in and take Kia after Ford dropped Kia. Not saying that that will happen but the South Korean Government might try if GM drops Daewoo. Governments don't like to lose jobs especially when the next election is close. Job loss will occur despite electrification especially when more robotics are used but Governments hate to lose jobs and will try to do things to retain them.
For all those unhappy union workers there is always the other Korea to the North. No labor disputes, worker’s paradise.