In Which Way to Go?: GM Korea at Crossroads of Being Another Ssangyong Motors or Another Renault Samsung Motor | BusinessKorea

Sunday, March 18, 2018

The labor union membrs of GM Korea have a meeing with lawmakers in the National Assembly on February 20.
The labor union membrs of GM Korea have a meeing with lawmakers in the National Assembly on February 20.
Seoul, Korea
21 February 2018 - 10:30am
Michael Herh

General Motors (GM) said that the automaker will make the final decision about its business in South Korea following the closure of Gunsan Plant at the end of February. The end of February is near at hand.

It is expected that the ongoing collective bargaining between the labor and management of GM Korea will be a major watershed for GM Korea in the future including the assignment of GM's new models to GM Korea as it will take several months to complete a due diligence inspection of GM Korea and make a decision about whether or not to give financial support to GM Korea. Some analysts say that GM's restructuring of its business in Korea is similar to that of Ssangyong Motors which had caused controversy that Shanghai Automotive of China took over and perfidiously managed Ssangyong Motors in the past.

According to the automobile industry on February 20, the labor and management of GM Korea started collective bargaining for 2018 for the first time on February 7 and will resume it as early as this week.

"If the labor and management hammer out a collective bargaining agreement based on cost reduction by the end of this month, a scenario can unfold. The scenario is GM will decide to allocate new models to its plant in Korea and ask the Korean government for support along with concrete plans and the Korean government and the Korea Development Bank (KDB) will accept it conditionally," an industry official said. Some representatives of the automobile industry expect that if GM appealed to unions to freeze base salaries and give up performance bonuses" based on the situation of GM Korea’s deficits and the labor union accepts it to avoid the worst situation of GM’s withdrawal from Korea, once, it will be able to lay the foundation for solving the situation.

If the labor and management make mutual concessions for a restructuring, it will be a turning point where oppositional and hostile labor relations at GM Korea will change in 30 years since the late 1980s. "We will decide on the future of the rest of our business facilities (Bupyeong 1 and 2 Plants and Changwon Plant) besides Gunsan Plant based on the results of consultations with the Korean government and the labor union," said Dan Ammann, GM chairman.

Many experts view that the restructuring process at GM Korea is a copycat case of a restructuring of Ssangyong Motors by Shanghai Automotive due to a management pattern of multinational corporations where they take profit as parent companies despite deficits of their subsidiaries. Ssangyong Motors was sold to Shanghai Automotive of China in 2004. Ssangyong Motors’s liquidity deteriorated rapidly due to sluggish sales. Shanghai Automotive offered the possibility of its withdrawal from Korea in December 2008, requesting support from the second largest shareholder -- the KDB and the Korean government. However, the Korean government refused to give support, saying that the largest shareholder, Shanghai Automotive, should give support to Ssangyong Motors ahead of the KDB and the Korean government. Finally, Shanghai Automotive applied for the court receivership of Ssangyong Motors in January 2009. Ssangyong Motors went bankrupt but Shanghai Automotive obtained benefits by taking basic SUV technologies from Ssangyong Motors. Relationships between GM and GM Korea are show business failures such as sluggish sales and giving rise to a controversy over fallacious profit taking similar to one during the Ssangyong Motor Incident. 

On the other hand, Renault Samsung Motor is a case in which a restructuring was completed quickly before the worst thing hit the company. Renault Samsung began executing a restructuring in early 2011 in accordance with the Renault-Nissan Alliance's recovery plan. When Renault Samsung Motors was in crisis, the labor agreed to freeze wages for three consecutive years in an effort to share pain.

To top it off, Renault cut its workforce by implementing a voluntary retirement plan while boosting the efficiency of Renault Samsung suffering from a huge deficit. After three years of a harsh restructuring, Renault Samsung turned the tide by producing a surplus in 2013. Renault Samsung’s Busan Plant was given volume for log exports to North America in 2014. "GM Korea is at a crossroads of following the Ssangyong model or the Renault Samsung model," said an official of a car maker who wanted to be anonymous. “This is the reason why this collective bargaining between the labor and management of GM Korea is so important.”


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