Labor, Product Challenges Await New GM Korea COO

GM Korea confirms Microsoft Korea CEO James Kim will join the company as its chief operating officer and will begin his new duties June 15.

Kim will work under Sergio Rocha, GM Korea’s president and CEO. Rocha has held that post for three years and was scheduled to be replaced in February. He is voluntarily remaining with the automaker as it contends with plummeting export sales, plant overcapacity and a union that wants a voice in all production decisions.

Rocha says Kim will have responsibility for managing all operations, including production, quality control, parts sourcing and labor relations. Rocha will continue to focus on other executive responsibilities, including strategic development and implementation of sales, marketing and service programs.

“Mr. Kim has an outstanding track record as a technology leader and consultant in manufacturing and telecommunications companies in Korea and the United States,” Rocha says in a statement issued by GM Korea. “He will focus on operations at a critical time when we are implementing new product programs and increasing our competitiveness and sustainability.”

Kim joins the automaker while it is in the early stages of wage negotiations with the GM Korea unit of the Korean Metal Workers Union. The union is asking for the KMWU-recommended national wage hike of 160,000 won ($145) per month and bonuses equivalent to five months of salary. The local union also wants a 5-year increase in the retirement age and unspecified production-quota guarantees and job guarantees.

In the Red

GM Korea is hurting financially, partly from last year’s wage settlement in which it agreed to include bonus payouts in the hourly wage calculation, as well as a huge drop in exports.

In 2014 it incurred a 149 billion won ($134.5 million) operating loss, versus a 1.1 trillion won ($992 million) operating profit in 2013. Revenue for the year plunged by 2.7 trillion won ($2.4 billion) to 12.9 trillion won ($11.7 billion).

For the first four months of 2015 GM Korea’s domestic sales were down 1.25% to 59,124, including a 12% drop in car deliveries to 38,178 units and a 3.7% uptick in SUV sales to 15,546.

Sales of GM Korea’s top domestic seller, the Spark minicar, slumped 15% to 21,558. Other domestic losers for the four months included the Aveo (-29.6%) and the Alpheon upper midsize sedan (-24.8%).

CBU exports fell 10.4% to 193,569 vehicles, with the year-to-date total down 8.4%.

The union already has blocked a company plan to transfer Malibu and Captiva production from an underutilized line at the Bupyeong complex, to eliminate the drag on operations in that facility and maximize efficiency of the lines to which the vehicles would be transferred.

The union has even asked GM Korea to begin assembling the Chevrolet Impala in Korea, instead of importing it. The automaker only has confirmed an interest in importing the flagship vehicle with no timetable announced. In all probability it would not sell in quantities that justify local production.

On the plus side, GM Korea confirms an engine export deal will add an additional shift to a Bupyeong engine plant.

However, the program is not scheduled to begin until 2017, when the subsidiary will begin shipping an initial annual quota of 45,000 engines to plants in the U.S., with a longer-range target of 120,000 engines annually.

In the emotional, reactionary atmosphere in the GM Korea plants, such long-range plans may fail to appease the present downsizing concerns of union rank and file members.

Several things are in Kim’s favor as he steps into the fray, analysts in Korea believe. He is of the Korean culture, is more fluent in Korean than English and has a reputation for strong leadership.