GM Korea Taking Military Threats in Stride

GM Korea insiders understand General Motors CEO Dan Akerson’s jitters about possible war with North Korea, but say his fears are misplaced.

A week after GM Korea President Sergio Rocha announced collaboration with LG Chem to develop a next-generation global electric vehicle, Akerson says in a television interview that if tensions between South and North Korea do not moderate, he might consider shifting production out of the country.

But GM Korea officials, and even the local workers’ union, appear to be taking Akerson’s comments in stride.

Officially, GM Korea tells WardsAuto the situation is being taken seriously. But behind the scenes it appears few feel threatened by North Korea.

“We, as with many, are watching this situation (with North Korea) closely with our hopes for continued stability for all Korean people and the region,” the auto maker says. “Are we making contingency plans? Absolutely. We would be irresponsible not to.

“However, other than to say we are committed to upholding the safety of our employees and assets and are focused on continuity of supply for our customers, we're not in a position to comment on those plans.”

Emergency talks reportedly are under way in Seoul between officials from economic ministries, the central bank and regulatory agencies, with the promise swift action will be taken to stabilize markets if necessary.

South Korean stocks fell, including Hyundai’s, after skittish investors began selling at a pace not seen in 20 months. Fear over tension with North Korea, as well as concern over the value of the yen, provided the impetus.

“In the past, (markets) recovered quickly from the impact from any North Korea-related event, but recent threats…are stronger and the impact may therefore not disappear quickly,” Vice Finance Minister Choo Kyung-ho is quoted as saying.

One source within GM Korea’s headquarters says Akerson’s comments were considered “fair,” given the GM chairman’s perspective from outside South Korea. But as fierce as the threats from North Korean leader Kim Jong Un may sound in the U.S., they do not have the same effect on the people of South Korea.

“People outside of South Korea think that something serious is going on here, but people in South Korea don’t feel any threat from North Korea,” he says.

“They may be working on missiles, nuclear weapons and so on, but we don’t care, because every month they are doing those sorts of things.

“It’s very fair for foreigners, and Mr. Akerson, to feel sensitive, but nothing is going on. It’s just political rhetoric. But for him as chairman of General Motors, he’s got to feel that some action needs to be taken if something serious happens on the Korean peninsula.”

The two Koreas are considered still to be at war, the source adds, “but we don’t shoot each other, at least not very often.”

Most men in GM Korea management have served in Korea’s armed forces, and every GM Korea plant and facility has safety shelters where employees can take cover.

“Every employee knows this and knows the procedures to follow in the event of a military emergency,” the source notes.

With respect to the workforce, it would quickly be depleted in the event of a major military crisis, he says, because all veterans of military service age would be required to go back into the armed forces.

However, there are contingencies to keep the plants operating, he says, even if there is a colossal exodus of workers to serve in Korea’s armed forces.

“We do know how to act if something major occurs, but most people think it never will,” the GM Korea source says. “It would be self-destructive for the North Korean leaders and they’re not that stupid.”

In the event of a national military emergency, all former servicemen must report for duty immediately and be available to fight, if necessary.

“If there is a war I have to leave my work right away and go to a designated place,” he says. “We know how to react. There are designated places to go for all who have served and have been discharged. Everyone knows his own designated place.

“We don’t wait for a call-up, we would just go. It’s a duty. Those under 40 have to take part in active service, including doing the fighting. Those who are older are assigned something different.”

Though Kim Jong Un’s remarks often make headlines that are heard around the world, they are always taken with a grain of salt by the people of South Korea, the GM Korea insider says.

“Even though the North Korean leader threatens something stupid every day, it’s OK and we understand it. He’s doing it because he needs food and neither South Korea nor the United States is listening to his demands.

“Here in Korea it’s a Friday. It’s peaceful. It’s a beautiful day. I can see a lot of people on the streets. The people are smiling, laughing. There is no tension in our workplace. We are enjoying the day.”

Officials at the headquarters of Hyundai, Korea’s biggest auto maker, declined to comment on the situation, but last month Hyundai U.S. CEO John Krafcik told WardsAuto the auto maker’s U.S. arm was unfazed by the rising tensions.

“My sense is that these things happen with significant frequency, and our approach is always just (to keep our) heads down and work.”

While Hyundai and sister-brand Kia have built many manufacturing plants outside South Korea over the past decade, they still are dependent on the homeland for parts. For example, the ’13 Hyundai Santa Fe Sport cross/utility vehicle assembled at Kia’s U.S. plant in West Point, GA, includes 53% Korean content, according to its window sticker.

Like others WardsAuto spoke to, Pil-joong Yoon, senior automotive analyst at Samsung Securities in Seoul, doesn’t think the present saber-rattling by North Korea will result in an actual military crisis or that it will impact the automotive scene in South Korea.

“I think it will turn out to be just a threat,” Yoon says. “The threat always has been there but never turned into a war. I don’t really expect bad things to happen in Korea. It will settle down.”

Yoon says a GM exit from Korea would have minimal market impact but would take a bite out of employment and export activity.

“GM’s market share in Korea is not so big, and whether they move out of Korea or not, it doesn’t have much impact on the domestic market,” he says.

While its major cities have blossomed with glass towers and avant-garde architecture that appear to make them vulnerable, South Korea always has maintained a state of war readiness, other sources say.

Every contingency is covered. The South Koreans have had 60 years to prepare their defenses, as well as their immediate military response and industrial action.

Every manufacturing complex, such as GM Korea’s plants and vehicle and engine development centers in Bupyeong and Hyundai’s vast automotive manufacturing complex at Ulsan, is a no-fly zone in which trespassing aircraft would receive a quick military response.

Every building in every city has its own escape routes and mass safety shelters for employees, shoppers and other patrons.

Roads between Seoul and the North Korean border have had automatically activated roadblocks in place for decades. There are pillboxes and artillery emplacements not only along the heavily armed demilitarized zone, but strategically located in depth throughout South Korea.

In strategic areas of the capital of Seoul, for instance, Special Forces units are inconspicuously housed in public or private buildings, ready to take action to protect places like the Korean presidential headquarters, the National Assembly, federal and local government offices, public water reservoirs, and nuclear power reactors and electric utilities.

But today, it remains business as usual at GM Korea, and few appear to feel any pressure from the rants being made in Pyongyang.