General Motors begins reducing presence in South Korea

Article by Anita Panait, on August 12, 2013

General Motors has started trimming its operations in South Korea as increasing labor costs as well as militant unionism prompted the carmaker to reassess its presence in a country that accounts for a fifth global production, three persons -- all privy to high-level talks inside the carmaker about the future of its strategy in the Asian nation -- told Reuters. 

GM’s plan underscores grievances from both local and foreign carmakers about the rapidly rising labor costs in South Korea. One of the sources told Reuters that GM needs to ensure it mitigates risk in South Korea “not over the next 2-3 years but over time,” adding the carmaker also needs to make sure not to become too dependent on one product source. The source noted if something goes wrong in Korea -- whether on cost, politics, or unions -- it has an immediate impact on the carmaker.

GM turned South Korea into one of its main production centers after acquitting Daewoo Motors in 2002. South Korea accounts for around 20 percent of GM's annual global production of around 9.5 million vehicles. Over 80 percent of GM cars produced in South Korea are bound for exports.

The sources told Reuters labor costs had increased significantly over the past decade, making South Korea a high-cost base -- a problem made worse by the South Korean Won’s relative strength over the past year. However, GM Korea's labor union believes that GM’s talk of reducing its presence is a bluff for to intimidating workers against seeking further pay hikes. In July, GM Korea inked an annual wage settlement that entails bonuses of KRW10 million ($9,000) per member. [source: automotive news - sub. required]

Topics: gm, south korea

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