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GM warns it may leave Korea as conflict with union continues

General Motors Korea (Yonhap)
General Motors Korea (Yonhap)

As General Motors Korea continues to struggle with labor strife and dwindling performance, GM’s international chief hinted at the possibility of withdrawing from the country.

In an interview with Reuters on Wednesday, Steve Kiefe, the president of GM’s international operations, said GM has other options to produce cars in Asia, including China, where it builds nearly 5 million vehicles a year.

GM workers have been staging two four-hour strikes daily since Oct. 30. The major sticking point is the wage freeze that began in 2018, when GM Korea nearly went bankrupt.

After 24 rounds of negotiations, the two sides failed to narrow their differences.

Kiefer said the ongoing dispute with the labor union has cost the company 17,000 vehicles in lost production, a number that will hit 20,000 by the end of the week.

“We’re basically being held hostage in the short term by lack of vehicle production,” Kiefer said during the interview. “That’s having a very significant short-term financial impact.”

The industrial action is making it “impossible” for GM to invest more or introduce new products in South Korea, and making the country “noncompetitive,” Kiefer added.

GM is asking for a two-year labor deal, not the current year-to-year agreements. It has also offered a signing bonus of 8 million won ($7,230) for each union member over 2020 and 2021.

The union maintains that the labor deals should be renewed yearly, and is asking for an annual performance bonus of 22 million won. The workers also want the company to continue operating its plants in Bupyeong, Incheon, where about 1,200 people are employed.

Over the extending dispute, Korea Development Bank, which is the second-largest shareholder of GM Korea, issued a statement to urge the two sides to find ways to narrow gap and for the labor union to withdraw the strike plan.

“GM Korea CEO Kaher Kazem visited KDB today to explain about the current situation,” KDB said.

“We delivered our deep concerns over the dispute exacerbating between the management and labor, and how it is holding back the normalization of business.”

GM Korea has been recording losses since 2014, with net losses reaching 320.2 billion won in 2019.

With low production rates and poor sales, the company agreed to accept a $7.15 billion rescue package from the Korean government on the condition that it continue to operate in the country for 10 years.

The automaker employs about 12,000 people in Korea and manufactures up to 500,000 vehicles, many of which are shipped to the US.

While the company has plans to produce the 2023 Chevrolet crossover in Korea, this is facing pushback due to the strikes, the GM chief said.

“We would prefer to make this model work ... but as of now, we are losing confidence that we are going to be able to continue to invest in that country,” Kiefer said.

Meanwhile, Kia Motor’s labor union also decided Thursday to stage partial strikes from Tuesday to Nov. 27, when employees will work four hours less every day.

The management and the labor union have been at odds over wages.

The automaker suggested providing incentives while freezing wages, but the workers are demanding an increase in base pay as well as a bonus, among other things.

The latest decision means a ninth consecutive year of strikes at the automaker. The last time the two sides sealed a wage deal without a strike was in 2011.

By Jo He-rim (herim@heraldcorp.com)
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