Unionized GM Korea Employees Authorize Strike

GM Korea hourly workers vote to go on strike four days after the automaker’s CEO steps down.

The vote ended Friday, July 7, with 69.4% of GM Korea’s 15,000 members of the Korean Metal Workers Union voting to authorize a walkout.

The union had filed for arbitration by the National Labor Relations Commission on July 5, stating wage negotiations with management had broken down after several rounds of negotiations that began May 23.

Under Korean labor law the union must wait 10 days from the arbitration application date before it can strike, so the workers must stay on the job at least through Thursday, July 13. However, the union reports it has called for a strike strategy meeting on Tuesday, July 11. It is expected to announce a strike-date target and whether it will be a full strike or rolling partial strikes that limit the hours of production on various specified days.

Last year the partial-strike strategy was held on 24 days and cost GM Korea some 3 trillion won ($2.6 billion) in production losses.

With GM Korea suffering heavy financial losses and production and sales volumes shrinking, workers are planning to go on strike to back their demands for a monthly wage increase of 154,883 won ($133) and a bonus of five months’ pay.

Further, perhaps inspired by the easy success of South Korea’s new pro-left president Moon Jae In in winning the June election, the union is demanding expensive and complex non-wage reforms, too.

Among other things the union wants a formal role in planning and a guaranteed production quota set for each of GM Korea’s three vehicle assembly plants. It also wants the current work schedules reduced to two straight 8-hour shifts, with no work beyond midnight.

The company says it refuses to negotiate anything but wages. Reportedly it has offered the union a 50,000 won ($43) monthly increase and a 9 million won ($7,800) bonus, which was flatly rejected.

It is reported that GM salaried and unionized workers, and union and government officials, were stunned by GM Korea CEO James Kim’s sudden announcement July 3 he was resigning to take a paid CEO job with the American Chamber of Commerce in Korea.

Kim’s departure, and the labor union’s strike intention, could foreshadow a decision by parent General Motors to dump its money-losing, strike-ridden Korean affiliate. GM CEO Mary Barra has been ordering withdrawal of GM plants and investments in other countries and regions where costs were deemed too high, the labor and regulatory climate was unfavorable and losses were ongoing.

Before announcing his resignation, Kim sent a warning note to GM Korea workers cautioning the parent company was reassessing its operations all around the world.

The KMWU has been shown data that labor costs at GM Korea are double that of any other production hub in GM’s international operations (U.S. and Europe excluded). The union also has seen data indicating GM’s risk exposure in Korea is very high. According to the data, GM Korea labor costs have increased 140% in the past 10 years, compared to 40% in the U.S.

GM Korea has logged huge net losses over the past three years, which many analysts say may cause GM to end South Korean operations.

The company lost 350 billion won ($303 million) in 2014; 987 billion won ($855 million) in 2015; and more than 631 billion won ($547 million) in 2016.

In 2016 total sales were down 4% with 597,000 vehicles sold. Sales represented only about 66% of the published 900,000-unit annual production capacity of the company’s three vehicle assembly plants: Bupyeong, 440,000; Gunsan, 250,000; and Changwon, 210,000.

GM Korea did log its highest-ever domestic sales in 2016, selling 180,000 vehicles. But in the first six months of 2017, combined domestic and export sales were off 9.3% with 278,998 vehicles sold, versus 307,512 sold in like-2016.

Concerns about GM’s possible pullout from South Korea have been sizzling for at least the past five years. Yet KMWU leaders responded by forming a committee to try to thwart any moves by GM to shutter any of the plants – or unload the company.

GM holds 76.9% of the stock of GM Korea, either directly or through its subsidiary operations. Stock held by Korea Development Bank, which owns roughly 17% of the shares, is now up for purchase, according to reports.

Analysts note GM would have to acquire the KDB stock before it could offer the company for sale. GM Korea has been seeking to acquire the KDB shares since 2012.

A possible obstacle to a complete wind-down of operations in Korea is the fact that GM Korea does a sizable business with GM China, feeding completely knocked-down units to that market for assembly as Buicks.