It has been found that approximately 2,400 GM Korea employees applied for voluntary retirement between February 13 and March 2 after GM announced that it would shut down the company’s plant located in Gunsan. The number, which is divided into 1,900 factory workers and 500 office workers, is equivalent to about 15% of the total number of its employees. In the Gunsan plant, which is scheduled to be shut down at the end of May, around half of 2,000 or so employees applied for voluntary retirement.
GM Korea is planning to decide on their retirement before the end of this week through a screening procedure. According to the company, the voluntary retirement is expected to help it reduce 300 billion won (US$270 million) in labor cost. It is aiming to reduce at least 500 billion won (US$450 million) in annual cost and deal with its high-cost structure by means of the voluntary retirement and wage negotiations.
Interestingly, the number of voluntary retirement applicants is larger in the other plants, which are located in Bupyeong and Changwon and not going to be shut down, than in the Gunsan plant. This is because a large number of employees a couple of years ahead of their retirement age applied for the voluntary retirement program coming with highly attractive incentives such as 10 million won (US$9,000) in car purchase cost, school expenses for their children, and a compensation equivalent to 200% to 300% of their average annual salary.
The remaining variable is the wage negotiations. GM Korea should save at least 200 billion won (US$180 million) a year, from employee benefits that total 300 billion won (US$270 million) a year, through the negotiations and the company is trying to persuade union members with the GM headquarters planning to assign the production of new cars next week.
The other half of the employees in Gunsan cannot be given the incentives of the retirement program and should leave the company only with their severance pay once the plant is shut down in May as scheduled. The number of those who can be sent to the other plants is limited, and they may be laid off. Still, the possibility of layoff is not high as it is likely to hinder financial support from the South Korean government.
In the meantime, GM Korea sold 36,725 cars last month, down 19% from a year earlier, both at home and abroad. During the same period, its sales volume in the domestic market dropped 48.3% to 5,804, affected by the likelihood of GM leaving the South Korean market, while its exports fell 9.4% to 30,921. For the first two months of this year, GM Korea sold 79,126 cars, down 14.2% from a year ago.