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November 22, 2005

SOUTH KOREA: Automakers could learn from GM cuts – paper

The Korea Herald has suggested that owners and workers of local car companies could learn from the painful job cuts at General Motors North American operations announced on Monday.

The Korea Herald has suggested that owners and workers of local car companies could learn from the painful job cuts at General Motors North American operations announced on Monday.

In an editorial on Tuesday the paper, which routinely reports the annual strike-led negotiations between Korean automakers and their unions, said:

“The troubles in General Motors Corp., which finally led to a management decision this week to reduce its work force by nearly 10% over the next three years and close nine North American plants, offer a lesson to the owners and workers of automobile companies here in Korea but it is a lesson that is really hard to learn.

“US media outlets these days are carrying sad stories of autoworkers’ families in Detroit, Michigan, who now face possible loss of generations-old jobs and sharp cuts in pay and retirement benefits which threaten to shatter their American dream. Fathers have to call college student children to come home, and retirees are worried about their heating bills this winter.

“Fortunately, GM Daewoo in Korea, which posted net profits in the second and third quarters this year, will not be affected by GM’s shrinking plan but people in the boardroom and on the assembly lines of Korean car companies should once again carefully examine what has happened in the world’s largest automaker over the past decades.

“It is widely known that the price of each unit produced by GM includes some US$1,500 for the healthcare benefits for its current employees and retirees and the amount is equivalent to the car’s steel cost. This is the result of a long history of generous labour contracts since the post-war auto boom which each time added a little more and more in pay and retirement benefits. With $5 billion in accumulated losses during the first three quarters this year and credit ratings downgraded to junk bond status, bankruptcy is feared although executives deny there will be any such filing.

“Korean car makers are about to enter a stage of serious competition with foreign cars in the domestic market. However, the international competitiveness of our auto industry remains relatively low as productivity growth has not kept pace with increased benefits that workers have earned through annual collective negotiations, invariably on strike threats.”

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