Debate Results

From left: Kwon Tae-shin, director of KERI; Amy Jackson, chairwoman of the American Chamber of Commerce in Korea; Sergio Rocha, president of GM Korea; Vikram Dorainwami, Indian ambassador to Korea; and Yoo Si-tak, former CEO of Parker Korea.
From left: Kwon Tae-shin, director of KERI; Amy Jackson, chairwoman of the American Chamber of Commerce in Korea; Sergio Rocha, president of GM Korea; Vikram Dorainwami, Indian ambassador to Korea; and Yoo Si-tak, former CEO of Parker Korea.

 

Foreign companies in Korea are skeptical about the current Korean labor market and want to see it become more flexible.

“We finalized collective bargaining agreements without labor strikes over the past two years,” Sergio Rocha, president of GM Korea said in the Special Debate titled “The Korean Labor Market Seen Through Eyes of CEOs of Foreign Companies in Korea” held by the Korea Economic Research Institute at the Grand Ballroom of the Conference Center in the Federation of Korean Industries (FKI) building. “Still,” said Sergio, “a road to peaceful labor management costs us a lot.”

“To reach an agreement, we had to pay more salaries. Over the past five years, GM Korea’s labor costs increased more than 50 percent,” Rocha added. Pay raises are a big burden on GM Korea’s total production costs. “GM Korea’s production costs had increased 2.39-fold from 2002 to 2014. During the same period, consumer prices rose 1.4-fold,” Rocha continued. “Comparing the two facts tells me that salaries increased too fast.”

Rocha also warned that the Korean auto industry’s production volume and jobs are moving abroad. Back in 2002, domestic automobile production accounted for 95 percent, while OEM production was only 5 percent. But in 2012, overseas production outstripped domestic. Last year, the former and latter stood at 55 percent and 45 percent, respectively. The gap is expanding quickly.

Rocha did not forget to point out low productivity. The HPV of the Korean automobile industry is 26.4 hours, and is outweighed by that of Toyota (24.1 hours) and that of GM (23.4 hours) in the U.S. In terms of per-capita sales, the average of the Korean automobile industry stood at 747 million won (US$642,016), lower than that of Toyota (1.594 billion won or US$1.37 million) and that of GM (968 million won or US$831,957) in the U.S.

Korean labor unions’ images are preventing foreign capital from making investments into Korea, said Yoo Si-tak, a former CEO of Parker Korea, a U.S.-based company that produces industrial equipment.

Parker had been running four business sites since the middle of the 1980s. The financial crisis in 1980 forced the company to lay off about 20 percent of its workforce. But among the four, the one with a labor union under the FKTU was a problem. Finally, an anti-layoff lawsuit was filed. The company finally won the lawsuit after four years passed.

“The legal battle made the U.S. headquarters of Parker have a negative view of Parker Korea. Since then, when they consider taking over a company in Korea, they check whether or not the company has a labor union first,” Yoo continued.

“Finally, Parker lost its interest in investment in Korea. In contrast, its investment in China expanded,” Yoo added. “If and when a labor dispute takes place again, I am concerned that the Parker headquarters may consider using an exit strategy.”

“Labor reforms by Italy and Spain took three years to see tangible results,” said Kwon Tae-shin, director of the research institute. “It is time for Korea to push for labor reform more strongly to move up the results of the reform such as an increase in jobs for youth.”

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