Is the US Car Maker Leaving Korea Owing to Soaring Labor Costs?

According to a report by the foreign press, General Motors Company (GM), one of the world's largest automakers, has been slowly pulling out of Korea due to labor costs and militant unions. There is concern that high wages and militant unionism will destroy decent jobs in Korea, as in the case of Detroit in the US. 

On August 12, Reuters reported that the reduction of production volume of GM Korea Company was attributable to labor cost surges and militant labor unions. The American multinational automaker appears to have already started to reduce its presence in Korea. A senior official at GM was quoted in the report as saying that the company was trying to gradually alleviate risks in Korea. The official also mentioned that when problems related to cost, unions, or politics occur, it has an immediate effect. 

GM Korea Company, formerly GM-Daewoo, produces 20% of GM’s annual global production. Since 80% of GM cars made in Korea are exported, it is an important production base for compact and small cars. But GM still wants to get out. The reason is high labor cost and strong labor unions.

In fact, the US-based auto manufacturer shifted the Cruze’s development team out of Korea late last year, following its decision to discontinue the production of the next-generation Chevrolet Cruze, a compact car, at its factory in Koonsan, Korea. Recently, it decided that a portion of small SUVs will be manufactured at factories in Spain. 

Regarding this move, Reuters pointed out, "General Motors considers that Korea is in its early stages of becoming a high-cost manufacturing base," adding, "The labor cost per vehicle made in Korea is US$1,133, twice the amount of an average US$677 produced in GM's international operations." It also explained that the issue of regular wages and tensions on the Korean peninsula also play their part in GM's decision to leave. 

But a spokesperson for GM Korea Company remarked, "Reuters' report is simply not true. General Motors continues to invest in its subsidiary in Korea," adding, "The adjustment of GM's production volume is based on its strategy and plan, and is not related to a pullout."