April 2, 2015 / 6:24 AM / 4 years ago

GM says Korea labor costs have surged, but has no plans to exit

ILSAN, South Korea (Reuters) - General Motors Co (GM) (GM.N) on Thursday said its labor costs have risen nearly 50 percent over the past five years in South Korea, where it makes nearly one-fifth of its global output, but that it does not plan to shut any of its four plants there.

Cars made by GM Korea are seen in a yard of GM Korea's Bupyeong plant before they are transported to a port for export, in Incheon, west of Seoul August 9, 2013. REUTERS/Lee Jae-Won

GM earlier this year said it plans to end production in Indonesia and cut operations in Thailand as part of broader restructuring. That fueled analyst expectations about reduction in South Korea, where the U.S. automaker has flagged surging labor costs and unstable industrial relations.

“Never say never, OK? But we are not saying that we have any plans to shut down any operations here,” Sergio Rocha, GM Korea chief executive, said in an interview at the Seoul Motor Show.

“It is very important for Korea Inc to make sure that we address the competitiveness of our labor costs, which are spiking to certain levels, that may impact our sustainability.”

GM classifies South Korea, the world’s No.5 carmaker, as one of its “high-cost” countries, Rocha said. The country’s biggest automaker, Hyundai Motor Co (005380.KS), suffers pay-related strikes on a near-annual basis and is currently in talks with its union about the way it pays workers.

“I have no doubt that something needs to be done in ‘pali pali’ to address labor costs,” the Brazilian-born Rocha said, using a Korean phrase for “quickly, quickly.”

GM’s Korean factories have had a troubled 18 months. At the end of 2013, the automaker said it would stop European sales of Chevrolet-branded cars by the end of 2015, most of which are shipped to the continent from Korea.

As a result, GM said it would reduce its Korean staff and shuffle production. The union, fearing plant closure, blocked the restructuring, leaving two plants underutilized.

Rocha said GM Korea is offsetting nearly one third of its European export losses by shipping Trax crossovers to the U.S.

He also said an announcement last month to make its next-generation Cruze compact in Mexico would not change its plan to produce the car in Korea.

As part of GM Korea’s annual wage deal last year, when it avoided a usually commonplace strike, the carmaker agreed to build the revamped Cruze in Korea starting in 2017.

Editing by Tony Munroe and Christopher Cushing

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