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GM Korea pressed to strike wage deal amid bleak conditions

PUBLISHED : August 11, 2017 - 18:08

UPDATED : August 11, 2017 - 18:08

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[THE INVESTOR] GM Korea is scrambling to resolve its labor dispute amid lingering rumors it may pull out of the country. 

The automaker was unable to strike a deal with its labor union after the 18th round of talks failed on July 24. The carmaker is very concerned, industry watchers say, as the GM headquarters is currently reevaluating production volumes and product plans for all its production sites in a bid to improve its bottom line.




“The labor union is basically forcing the company to withdraw from the country. The domestic automobile union is a member of Korea’s metal trade union, which is often politically motivated, and it should be noted that the GM headquarters in US is unlikely to accept the union’s high demands,” said Lee Ho-geun, professor at Daeduk University. 

GM has been steadily trimming its global operations since 2013. GM’s European Chevrolet brand sales network was withdrawn and the Australian plant was also closed down. Plants in Indonesia and Russia have been shut down as well, and the firm has decided to withdraw from India. GM has also sold off its European Opel and Vauxhall brands to France’s PSA Group. 

The sell-off is expected to be a blow to GM Korea, which sent half of its exports to Opel last year. GM Korea’s production capacity is also becoming questionable, since its complete car production fell to 570,000 in 2016, down from 780,000 in 2013. 

In terms of revenue, the local unit posted a net loss of 631.5 billion won (US$552.07 million) last year. In 2014, losses had reached 353.4 billion won, and widened to 986.8 billion won in 2015. During the first quarter of this year, the carmaker posted a loss of 258.9 billion won after its midsize Cruise sedans failed to measure up. 

Despite the company’s bleak circumstances, the labor union is still persisting with its strike, demanding higher salaries and other benefits.
The automaker initially offered an increase of 50,000 won in basic wages in June, a bonus of 4 million won, and further subsidies of 5 million won. The 9 million won figure that was offered was a significant raise from the 6 million that was paid out in 2016. The labor union, however, is still holding out for a wage increase of 154,883 won and bonus of 20 million won or more. 

Industry experts are predicting that it will only be a matter of time before GM withdraws from Korea, especially as its agreement with KDB, the second largest shareholder of GM Korea, expires on Oct. 16 this year. The agreement had kept its headquarters from disposing its stake in the Korean operations for 15 years.

By Alex Lee (alexlee@heraldcorp.com)

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