The auto maker could be forced to pay higher wages and further compensate employees for overtime going back three years.
Akerson: We are not abandoning Korea.
CEO Dan Akerson tells South Korea President Park Geun-hye the auto maker plans to remain in the country but needs workers there to abandon a lawsuit threatening to increase labor costs.
Akerson was part of a roundtable business meeting yesterday in Washington hosted by the U.S. Chamber of Commerce and chaired by Park. More than 170 American and Korean business leaders attended the confab.
Cho Won-dong, Park’s senior economic affairs secretary, is quoted as saying that during the discussion Park asked Akerson point-blank if his attendance at the meeting signaled GM did not plan to withdraw operations. The auto maker earlier indicated a shift in its sourcing strategy might be an option should friction between North Korea and the U.S. escalate.
Akerson told Park, “We are not abandoning Korea,” Cho says, but the GM CEO then attached two conditions to remaining in the country.
The first involves the weakening Japanese yen and strong Korean won. The exchange rate is giving Japanese vehicle importers an edge over domestic competitors, an area of concern for GM, Cho notes.
The other factor revolves around GM Korea’s labor union and lawsuits filed by workers demanding that bonuses be included in salaries when calculating overtime pay and other benefits.
Cho says Akerson believes the auto maker would face a severe financial burden if the lawsuits succeed.
The GM Korea workers union is considering a response to Akerson’s comments, viewed as a direct appeal to Park to pressure the courts to side with the auto maker and encourage legislative action to strengthen existing labor laws in the industry’s favor.
The suits seek compensation for back overtime pay, when bonus amounts were excluded from calculations. With various negotiated bonuses amounting to as much as 30% of a worker's salary in some years, including the bonus in the overtime calculation would result in a sizable adjustment for the past 3-year period.
Government regulations under the Labor Standard Act are vague and do not specifically exclude bonuses from basic pay calculations, but some rulings and guidelines issued by Korea’s Employment and Labor Ministry do exclude the bonuses.
The lawsuits filed against GM Korea,, Kia and many other Korean companies seek an overtime compensation adjustment for the past three years, the longest period allowed under Korean statutes.
The Washington roundtable meeting could have a negative effect on current collective-bargaining discussions just under way in Bupyeong, some analysts believe.
The situation is touchy enough, they say, with the Korea Metalworkers Union seeking a reduction in hours worked, increases in pay and substantial bonuses for the 2013-2014 period.
However, Cho puts a positive spin on Akerson’s comments, saying in a statement the biggest outcome of the meeting was the GM CEO’s assurance the auto maker would follow through on a February pledge to invest 8 trillion won ($7.4 billion) in GM Korea over the next five years.
The planned investment covers expansion of the GM Korea Design Center in Bupyeong, vehicle development and retooling, but does not include new brick-and-mortar, a GM Korea source told WardsAuto earlier.
According to a statement, Park promised everyone at the meeting, “We will deal boldly with needless red tape and we will breathe fresh energy into all facets of economic activity. Taken together, these efforts will make Korea a destination of choice both for American investors and other foreign businesses.”