GM says labor unrest to corner Korean business

GM says labor unrest to corner Korean business

An employee works at an assembly line of GM Korea’s Bupyeong plant in Incheon, Korea, in this file photo. Reuters-Yonhap

By Kim Yoo-chul

Senior management officials at General Motors (GM) headquarters warned labor representatives of GM Korea several times that repeated factory closures due to labor disputes will force the Korean unit to encounter a very difficult situation in terms of receiving new electric vehicle (EV) production orders.

The exact words GM executives used in their direct encounter at the automaker’s U.S. headquarters with the GM Korea labor delegation remain unknown. However, the central point GM officials delivered is that such repeated strikes will leave them with no choice but to stop investing further or allocating new EV orders to the Korean unit.

During the meeting, Doneen McDowell, head of labor relations at GM, told the Korean unionists that the U.S. automaker’s factories in 40 different countries are competing to win more EV orders, sources familiar with the issue, said Friday.

Three GM Korea labor representatives, including GM Korea labor chief Kim Seong-gap, and GM Korea CEO Kaher Kazem recently returned home from a week-long visit to GM headquarters and its plant in Mexico.

McDowell’s remarks came in response to questions about the possibility of GM Korea receiving a sizable amount of EV orders amid its moves to realign output volume based on targeted regions.

Also, GM’s Executive Vice President of Global Manufacturing Gerald Johnson, who also attended the face-to-face meeting with GM Korea’s labor delegation, reportedly said the U.S. automaker is searching for reliable evidence that would justify the head office’s decision for long-term investments in the Korean affiliate. Johnson also told them GM headquarters is keeping an eye on the possible co-existence between labor and management, said the sources.

Johnson also delved into specific ways that unionized workers in factories in the United States and Mexico interact with management, serving as models for co-existence in handling conflicts of interest. GM’s Mexico plant, which has been competing with GM Korea to receive EV production orders, hasn’t seen a single labor strike over the last 26 years.

Michael Perez, executive director of global manufacturing strategy and planning at GM, was said to have raised issues of higher labor cost and labor unrest seen in GM Korea as one of the core factors prompting headquarters raise questions over the predictability and stability of the Korean affiliate. The exact words Johnson and Perez said were also unavailable.

Regarding such reactions and assessment by GM executives, labor representatives who attended the meeting repeatedly asked them to make a swift decision on more EV production volume being allocated to Korea.

It’s no surprise to see such warnings delivered by GM executives to GM Korea labor representatives as the U.S. automaker recently warned that persistent labor unrest could force it to exit Korea. GM operates three plants in Korea ― two in Bupyeong and one in Changwon ― which are capable of producing a total of 630,000 vehicles a year. The automaker employs around 12,000 people in the country.

GM says labor unrest to corner Korean business

In this 2019 file photo, GM Korea’s plant in Bupyeong is in a state of suspended operations as labor union members downed tools to demand a wage increase. Yonhap

GM Korea said strikes by its unionized workers and other types of labor action have resulted in more than 15,000 vehicles worth of lost output, rendering the Korean unit unable to turn a profit in the near future. Unionized workers at GM Korea were asking management to increase their base salary, pay performance bonuses and to guarantee job security.

GM Korea reported 316.9 billion won operating losses last year, increasing the cumulative size of losses to some 5 trillion won. In 2019, it reported an operating loss of 332 billion won.

Because of tepid production rates and poor sales, GM agreed on a massive rescue package worth some $7 billion, including $750 million from the state-run Korea Development Bank (KDB) back in 2018. Under the specific terms of the “binding deal,” GM isn’t in a position to exit its investment here for 10 years.

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