What is in this article?:
- Union Fears Korean Production Contractions Signal Change in GMâ€™s Global Strategy
- Making Up The Difference
The loss of the next-gen Cruze, slated for 2015, will have more impact on jobs than losing the Aveo. However, workers now are worried GM may transfer its small CUVs to the Zaragoza, Spain, plant.
Opel Mokka (Chevy Trax) may be next model to transfer production out of Korea.
Union negotiators were taken aback last week when GM Korea CEO Sergio Rocha disclosed new product-development plans have been changed and that the next-generation Chevrolet Aveo/Sonic small car due out in 2016 will not be built in Korea.
Instead, the car will be produced in the U.S. and China, where it enjoys stronger sales, Rocha is quoted as saying by a source knowledgeable about the conversation. The CEO points to a recent company survey that finds it would be too costly to build the Aveo in Korea, where it does not sell well.
But the union is suspicious based on the belief that GM Korea is trying to downsize the company, the source says. This is apparent in recent employee early-retirement buyout offers and the fact the auto maker is not replacing the workers it is losing through the natural retirement process.
Management declines to discuss the matter, issuing a statement to WardsAuto that says in part, “Decisions are based on a comprehensive business case to deliver top-quality vehicles as cost-effectively and quickly as possible.”
The loss of the Aveo/Sonic will not have a huge impact on jobs in Korea, the source says. GM Korea will continue to build the current model for domestic consumption and some overseas markets.
Parentannounced in February it was investing $7.3 billion in Korea over the next five years to focus on mini- and small-car development and powertrains. Included will be the doubling in size of the subsidiary’s design center in Bupyeong to be completed by the end of the year. The auto maker also will step up the export of complete-knocked-down kit assemblies.
But the Aveo’s withdrawal from local production, following news that the next-gen Cruze will be built elsewhere and recent reports that other models may be transferred to Europe, has union members worried about the future of GM Korea as a manufacturer.
What’s more, the union appears to have little say in its fate. The local branch of the militant Korea Metal Workers Union is powerless to take any action, the source says.
“They are very unhappy about it, but say this business matter is determined byInternational Operations. But GMIO says the local union can negotiate only with GM Korea management,” he says. The union can’t strike because it is outside of the collective-bargaining negotiations and would be deemed an illegal action.”
So what’s in store? The tea leaves are hard to read, but a trend does seem to be emerging.
The Aveo is not popular in Korea, selling fewer than 300 units a month, the source says. It accounts for only about 30% of production at Bupyeong Plant 1, with some 70% of output dedicated to the Chevrolet Trax, Buick Encore and Opel Mokka small cross/utility vehicles.
The loss of the next-gen Cruze, which is slated for 2015, will have more impact on jobs than will the Aveo. However, a German newspaper report this week is giving the union new worries that one or all of the three CUVs may be moving to GM’s plant in Zaragoza, Spain, to fill capacity and end supply constraints on the models that are selling well in Europe.
The source confirms the media report could have legs. “GM Korea is now working on a project to increase the line speed at Bupyeong Plant 1 to increase its capacity for producing the (CUVs). Management has asked for cooperation from the union, saying if it refuses to cooperate with the plan, the volume will go somewhere else.
GM Korea tells WardsAuto in a statement, “We can confirm that GM has announced it is conducting engineering studies to determine where additional small (CUVs) will be produced beyond the current locations. But we cannot confirm anything beyond that, including speculation related to the Zaragoza plant.
“When there is something to announce, we’ll tell impacted stakeholders first, including our union partners, employees and government officials. Small (CUVs) have grown in popularity in many markets, including Europe. This is one of the fastest-growing segments globally. We are growing our share in that market, and it is always an option to look for ways to make production and capacity utilization more efficient.”