SOUTH KOREA: GM reducing its presence in South Korea – report
General Motors (GM) has gradually started reducing its presence in South Korea as it faces increasing labour costs and militant unionism in the country, reports Reuters, citing sources "familiar with GM's thinking".
A source said, "We need to make sure we mitigate risk in [South Korea], not over the next two to three years but over time, not to become too dependent on one product source. If something goes wrong in Korea, whether it is cost, politics, or unions, it has an immediate impact."
At present, South Korea accounts for a little over 20% of the automaker's annual global production of around 9.5m cars. More than 80% of GM cars made in the country are exported.
The sources said there has been a sharp rise in labour costs over the past decade, making the nation a high-cost base. The South Korean won's relative strength over the past year made matters worse.
However, GM Korea's labour union disagrees and believes the company's talk of cutting its presence has been designed to discourage workers from seeking pay hikes.
"Our view is that the management is making threats to pressurise us and make us cooperate," said union spokesman Choi Jong-hak.
GM's recent decisions include moving production of newer models away from South Korea. Sources say GM has shifted the Chevrolet Cruze's lead development team out of South Korea to its technical centre near Detroit. The company is said to have similar plans for the Opel Mokka subcompact SUV.
Labour cost per vehicle at GM Korea is expected to reach US$1,133 in 2013, said a union official, citing a presentation given by the company management. In comparison, GM faces an average labour cost of $677 per vehicle across its international operations.
In July, GM Korea reached an annual wage settlement that included bonuses of KRW10m (US$9,000) per member. The move followed partial strikes by blue-collar and white-collar workers, which in turn followed an intense walkout by the union.
GM is particularly concerned about union legal action aimed at redefining the term "regular wages" in South Korea. In 2012, a high court ruled that regularly paid bonuses should be counted as part of a worker's "base pay", which is used to calculate overtime and pension payments. The ruling is being reviewed by the Supreme Court at present.
GM Korea's CEO Sergio Rocha expects labour costs to increase by 10-12% if forced to consider bonuses as part of regular pay.