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.
Making Up The Difference
GM Korea is offsetting some potential job losses resulting from the upcoming move of the Cruze and Aveo by transferring production of the Captiva CUV from Bupyeong Plant 2 to the Gunsan facility, which makes the current Cruze. However, the Captiva, including the Orlando model, is a low-volume vehicle and likely will not make up the difference.
There is some good news: GM Korea will get the next-gen Malibu, which will be produced at Bupyeong Plant 2 that is building the current model, while the Changwon small-car factory will build the next-gen Spark.
But negativity among workers prevails. The cancellation of plans to produce the Aveo/Sonic and Cruze in Korea, plus worries over Spain, have added rancor to the current collective bargaining negotiations. GM Chairman Dan Akerson’s remarks to new South Korean President Park Geun-hye last month that wages are too high in Korea only added to the union’s angst.
Rocha is participating in most of the labor negotiations because of what the union calls the abject failure of the GM Korea’s industrial-relations team during negotiations in 2012, the source says. Those talks dragged on for five months, and the auto maker lost substantial production because of repeated strike actions taken by the union to move things along.
This year, the union is standing tough, he says, and so far management has not indicated any concrete response to its demands. Workers are focused on three primary areas: wages, the introduction of a back-to-back shift system and future vehicle-development plans.
The worry is that GM Korea is not replacing workers, the source says. “About 300 employees will leave the company this year and around 2,000 will leave over the next five years, but the company does not show any plan to hire replacement workers.”
Local analysts tells WardsAuto they do not believe the transfer of vehicle production from GM Korea to GM plants overseas would have much impact on the country’s overall industrial picture. Competitors could easily absorb all demand created by the loss of these models.
However, the impact on the nation’s economy if GM Korea was to end or majorly downsize its manufacturing operations would be quite another matter.
The auto maker directly employs more than 11,000 workers, supporting staff and management, which represent more than $500 million in direct payments. Income of in-plant supplier employees and service providers is estimated at close to triple that amount.
Combined, $2 billion in consumer purchasing power would be lost, unless there was an offsetting employment gain by GM Korea’s competitors and their suppliers.
The economic impact in the Incheon region and in Gunsan and Changwon would devastate the local economies as lost production would be picked up by competitors in other regions of the country.
Analysts believe it would all even out long term, but short term it would be a shock to the Korean economic system, which is struggling just to show a 2% gain in gross domestic product this year, despite the country’s enormous export volumes. It would be intolerable to local economies where GM Korea operates, they say.
On a cumulative basis so far this year, GM Korea has been holding its own against all major Korean competitors. However, analysts say the comparative numbers do not take into account that bothand Kia have lost considerable production and cannot fill orders because their unions refused to work weekend overtime schedules for nine weekends in April and May.
For the year’s first five months, GM Korea’s total output for both the domestic and export markets was flat on a yearly comparison at 331,245 units, according to a June 6 report by automotive analyst Heeguen Chae atSecurities.
Hyundai’s production for domestic and overseas markets in the same period was off 7.3% from year-ago to 751,741 units, while Kia was down 3.1% to 684,300.Samsung output slid 30% with just 40,700 vehicles produced.
Although it ranks third in domestic sales, GM Korea still has a difficult time making inroads against the competition. May sales were down 9.2% to 11,810 units, while the first five months’ result fell 5% to 55,042.
Hyundai and Kia both saw domestic deliveries decline in May, with Hyundai down 0.2% to 57,942 units and Kia down 2.3% to 39,500. For the five months, Hyundai’s domestic sales inched up 0.6% to 270,063, while Kia fell 3.7% to 188,559. GM Korea’s exports through May rose 1.1% to 276,203 units. Hyundai was down 11.2% to 481,678 and Kia fell 2.9% to 495,741.