GM Korea Union Seeks Hefty Pay Hikes, Job Guarantees

GM Korea and the GM Korea Branch of the Korea Metal Workers Union open 2015 wage and benefit negotiations, with the union pressing for a wage increase 2½ times what it accepted without a strike last year.

The automaker is saying nothing publicly about the talks while telling KMWU representatives it can’t afford to meet such a demand.

The union has asked for a monthly wage increase of 159,900 won ($145) and bonuses equal to five months’ pay. The bonuses could range from 3 million to 5 million won per month ($3,000 to $4,500) for each of the five months, depending on the worker’s seniority. This would yield bonuses of 15 million to 25 million won ($13,600 to $23,000).

The wage-hike demand is 252% higher than the 63,000 won ($57) monthly increase agreed upon in 2014 and the bonuses would be 43% to 238% higher than the average 10.5 million won ($9,500) paid out last year.

Negotiations began April 23 and three rounds of bargaining have been held since then. GM Korea President Sergio Rocha is participating directly in the talks.

“It is not appropriate to comment in detail about the wage negotiations between the company and labor union, as the negotiations are just in the early stages,” a GM Korea spokesman tells WardsAuto.

The automaker also is not commenting on published reports that GM International Operations may shift small-car export operations from its relatively high-cost plants in South Korea to those in Halol and Talegon in India.

Stefan Jacoby, GM executive vice president and president of GMIO, told Reuters in an interview this month that GMIO targets output of 400,000 vehicles annually in India by 2025, a sevenfold increase over the 57,600 produced in 2014. Of the 400,000 builds, GM India would export 30%, or 120,000 vehicles annually, he said.

Will Spark Exports Take a Beating?

GM India last year launched an export program when it began shipping locally made Beat minicars (India’s version of GM Korea’s best-selling vehicle, the Chevrolet Spark) to regional markets, focusing on Southeast Asia and Latin America, according to Jacoby.

To support such an upswing in sales and exports GM India would need to nearly double the current combined annual production capacity of 280,000 vehicles at its Halol and Talegon plants.

The statements from Jacoby, who oversees both GM Korea and GM India, have prompted KMWU negotiators to demand production-level guarantees that would preserve jobs. Union sources say they are demanding allocation of various vehicles to the Bupyeong plant and to the underutilized facility in Gunsan.

GM Korea and the union agreed in February to eliminate one of two shifts and trim production from 54 to 48 vehicles per hour at the Gunsan plant. Much of the factory’s output consisted of vehicles bound for Europe, but exports effectively ended when GM pulled most of the Chevrolet brand out of the region.

Meanwhile, GM Korea’s Changwon plant on the southern tip of the Korean peninsula is running full-bore to churn out the Spark minicar, which is GM Korea’s hottest export product as well as its top seller locally.

With GM India’s Halol plant now exporting the Beat, which is basically the same vehicle, KMWU leaders are concerned GMIO will hike production volumes in India rather than raise capacity in Korea to meet export demand.

Last year, in order to prevent a strike, GM Korea was the first automaker to accede to the union’s insistence on including bonuses as part of the hourly wage calculation. Overtime costs and employee severance packages subsequently ballooned, and while GM Korea had a huge reserve fund to cover the higher expenses its profitability suffered.

The negotiations also led to a pledge from GMIO to drop its plan to pull production of the new Chevrolet Cruze out of Korea. The union was assured the sedan will go into production in late 2016 at the Gunsan plant.

GM Korea’s 2014 domestic sales increased 7.6% year-on-year to 151,013, but exports slumped 24.3% to 476,755 units, according to WardsAuto data. The automaker also produces complete-knocked-down kits at a dedicated factory in Incheon and ships them to GM Shanghai in China and to Uzbekistan.