GM Korea Union Concerned Over Loss of Next-Gen Chevy Cruze Production

SEOUL – GM Korea’s labor union is worried there is something General Motors is not telling them.

Labor officials learned Nov. 1 from GM Korea President Sergio Rocha that the next-generation Chevrolet Cruze will not be produced in Korea, raising concerns the U.S. parent plans to shift the small car’s manufacturing to recession-wracked Europe to help boost its troubled Adam Opel unit in Germany.

GM management has not said where the new model will be made. The Cruze already is built in the U.S, Brazil and China, in smaller numbers in Russia and in several other countries for the local markets.

The concern here is that the Cruze accounts for 50% to 60% of production at GM Korea’s plant in the southwestern city of Gunsan, and management has not told the union whether it will be replaced.

The union today called for a meeting with GM’s Tim Lee, chief of international operations, and Chairman and CEO Dan Akerson, a Reuters report says.

“The next-generation Cruze is the lifeline of the Gunsan factory,” union leader Min Ki was quoted as saying earlier. “The plant is flooded with anger about GM, which is trying to cut its lifeline.”

The union has other concerns as well, including why GM is negotiating to buy up all of the Korean Development Bank’s shares in the auto subsidiary, as well as the exit earlier this year of GM Korea President and CEO Michael Arcamone, who suddenly left his job with no successor in place.

GM Korea is refusing to make any executives available for media interviews and apparently the KDB, the unit’s major creditor, apparently is doing the same. GM owns close to 77% of GM Korea, but the KDB’s 17% holding gives the state-run bank the right to veto management decisions.

“The management has also delayed the already-scheduled meeting with the union, and executives are reluctant to talk with union leadership, which is not ordinary,” a source close to the situation tells WardsAuto. Several sources agreed to discuss the matter, while warning their opinions do not constitute official union statements or positions.

The union is wondering why GM Korea is trying to buy out the KDB shares, one source says. “We have asked management several times, but they just say they want to eliminate the risks related to the anticipated initial public offering of KDB.”

The bank is planning to convert from a government-backed institution to a publicly held company.

“We have suspicions (GM Korea) wants to deprive KDB of its minority shareholder’s right, which allows the bank to veto special resolutions such as the purchase and sale of assets, shares and technology,” another source says.

GM Korea has assured union leaders that the present-model Cruze will continue production at the Gunsan plant, even as the new model moves elsewhere. However, analysts say exports of the current Cruze to developing markets are low volume.

“We don't think the production of the current Cruze model will offset the expected volume reduction in the Gunsan plant,” a source says. “The company did not make any mention of another model as an alternative to the next-generation Cruze.”

Reuters says the next-gen Cruze, due in fall 2014 as a ’15 model, will be the first vehicle to use a global GM platform that could underpin 2.5 million compact sedans and cross/utility vehicles by 2018.

Also unanswered is whether the new Cruze will be sold in Korea. Exports to Korea would be met with strong resistance, analysts believe.

“We cannot accept the transfer of production volume,” a knowledgeable source says. “The GM Korea branch of the KCTU (Korean Confederation of Trade Unions) thinks what is happening to GM Korea and its employees is a threat to the livelihood of our union members. We are really concerned about the possibility of downsizing or personnel redundancy.”

But another source says that if GM Korea management can find a way to guarantee the Gunsan plant will keep operating at capacity with the current Cruze model, it might take the sting out of the move.

GM already has halted shipments of the Aveo subcompact from Korea to the U.S., which had been GM Korea's top export to North America. GM began producing of the Aveo’s replacement, called the Sonic, in 2011 in the U.S at its plant in Orion Twp., MI.

The Korean factory that produces the Aveo is in full operation (here), “so we don't have any problem with the production of the (Sonic) in the U.S.,” one source says.

The union is very concerned about any downsizing measures, including the recent voluntary retirement program that was offered to GM white-collar workers. “We heard the company failed to meet the downsizing target, and the program is still going on,” he says.

Asked about the impact of changing the name of the company to GM Korea and replacing the former Daewoo brand with the Chevrolet nameplate, several sources are very positive about that move.

However, they say GM Korea is not pushing domestic sales and growth is sluggish, suggesting the auto maker’s interest lies more with exports. “The Daewoo brand was tarnished during the course of the company's bankruptcy. We don't think Koreans were more loyal to Daewoo than (they are) Chevrolet,” one source says.

“The KCTU is paying special attention to (all) these issues,” he says. “The union organizations at all levels are in talks to deal with whatever situation will unfold.”