GM not pulling out yet: sources

By Korea Herald

Court ruling offers cover for exodus, but won’t be last straw for carmaker

  • Published : Dec 19, 2013 - 19:55
  • Updated : Dec 19, 2013 - 19:55
While GM Korea is paring down operations in Korea, it has not yet decided whether or not to actually leave, sources close to the carmaker said on Thursday.

“General Motors has of course been frustrated with working in a labor environment such as Korea, where the unions fight tooth and nail amid steadily rising labor costs,” said one source close to GM Korea, who declined to be identified.

“However, it’s also going to be difficult for GM to suddenly pack up one of its key production facilities,” said the source.

GM Korea currently produces more than 900,000 cars a year, which is more than the number of vehicles sold in Europe, expected to reach 850,000 this year.

Experts said the latest court decision that said bonuses should be included as “ordinary wages” may serve as an excuse for GM to leave the country, but won’t be the real reason.

“It takes time for a company to decide to close or open an entire regional corporation, and while the argument on ordinary wages can be a ruse, it won’t be the only reason if and when GM Korea decides to shut down,” said Shin Jung-kwan, a senior analyst with KB Securities.

Shin did acknowledge that GM Korea does seem more than ready to reduce its operations here.

Other regions such as Vietnam may be one alternative for GM, but the facility’s production capacity is exceedingly low compared to Korea.

Stormy labor relations are said to be the bigger reason behind GM’s frustrations with working in Korea.

“GM is a company that knows who it’s up against when it comes to unions, and the company is already fed up with continued protests staged by GM Korea’s labor unions even before the court ruling,” said one industry watcher.

GM is a company well-accustomed to dealing with organized auto labor activity, which took a toll on the U.S. car industry during the stormy rallies in Detroit.

GM had been bracing for a similar situation when it took over Daewoo, but now, the rising labor costs are making the company far less tolerant.

With the court ruling, GM has now even less enthusiasm for maintaining its 6,000-strong workforce in Korea.

Further fueling the speculation of GM Korea’s reduction and possible relocation out of the country was its recent decision to offer early retirement packages to its office staff. However, the production staff is not eligible.

The cut follows a series of similar moves last year, and the fourth since 2009.

Recently, GM also indicated it would pull the Chevrolet brand from Europe from 2016 after scaling back production, possibly to around two-thirds of the current 800,000 cars this year for the region.

As many have pointed out, this will mean reduced production for Korea, which handles up to 30 percent of all of GM’s cars sold in Europe.

Other foreign carmakers that may be feeling the heat of the court ruling have yet to speak up.

For the high-selling companies such as BMW, Mercedes-Benz and Audi, the move seemed unlikely to cause much of an uproar. But for the smaller producers including GM, higher wages will likely lead to alterations in their business strategies, as they had already been seeking a way out.

By Kim Ji-hyun (