GM plans gradual pullout of S.Korea as labor costs surge

Sun Aug 11, 2013 5:08pm EDT
 
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By Norihiko Shirouzu and Hyunjoo Jin

SEOUL (Reuters) - General Motors Co. (GM.N: Quote) has begun gradually cutting its presence in South Korea after mounting labor costs and militant unionism triggered a rethink of its reliance on the country for a fifth of its global production, three individuals familiar with GM's thinking said.

The U.S. automaker's plan, which already appears to have been put into action with recent decisions to shift production of newer models away from South Korea, highlights complaints from both local and foreign carmakers about rapidly rising wage costs in the world's seventh-largest exporting nation.

"We need to make sure we mitigate risk in (South Korea), not over the next 2-3 years but over time, not to become too dependent on one product source," said one of the sources who declined to be identified due to the sensitivity of the matter.

"If something goes wrong in Korea, whether it is cost, politics, or unions, it has an immediate impact."

GM made South Korea one of its main production hubs after its 2002 purchase of failed local carmaker Daewoo Motors. The country accounts for slightly more than 20 percent of GM's annual global production of some 9.5 million cars. More than 80 percent of those GM cars made in the country are exported.

The sources, all privy to high-level discussions inside GM about the future of its South Korean strategy, said labor costs had risen sharply over the past decade, turning the country into a high-cost base -- a problem exacerbated by the South Korean currency's relative strength over the past year.

GM Korea's labor union disagrees and believes GM's talk of reducing its presence is a bluff designed to intimidate workers against seeking further pay hikes. Last month, GM Korea reached an annual wage settlement that included bonuses of 10 million won ($9,000) per member, according to the GM Korea labor union.

"Our view is that management is making threats to pressure us and make us cooperate," union spokesman Choi Jong-hak said.   Continued...

 
Workers of GM Korea work at an assembly line of GM Korea's Bupyeong plant in Incheon, west of Seoul, in this April 8, 2013 file photo. REUTERS/Stringer/Files