GM CEO Mary Barra sent an email to GM Korea executives last month, saying that those who have worked for 12 years or more can voluntarily retire.
GM Korea also notified those subject to retirement of details about the upcoming procedure. In her email, the GM CEO stressed that the company will have to resort to non-voluntary restructuring such as an involuntary program unless they cooperate for the voluntary retirement.
GM’s voluntary severance program targets classified salaried employees in the U.S., Canada and Mexico, and most global executives. This program is for employees who have 12 years or more of service – so those who started on December 31, 2006 or earlier.
GM Korea said GM’s salaried employees in regions other than North America are not subject to the voluntary retirement program.
The GM CEO said GM’s structural costs are not aligned with the market realities nor the transformational priorities ahead. She stressed the company must take significant actions now to address this, saying that a portion of this reduction of structural costs will be in people costs.
The email contained some remarks that could be seen as implying withdrawal from the South Korean market as well. She said that GM is facing serious challenges and “exiting underperforming markets or improving our business operations are within our control.”
Some analysts say the remark implies that GM can leave the South Korean car market if GM Korea fails to improve its productivity and profitability by means of manpower reduction or the like.
GM Korea is a less profitable arm of GM. For the past three years, GM Korea’s losses amounted to three trillion won, led by a decline in exports in the wake of the shutdown of General Motors Europe and the sluggish sales of main products. Still, the number of strike days amounted to 17 from 2011 to 2017 and the base pay had to be increased each year from 2012 to 2017. The pay increase was 5.4% in 2012 alone and 2.7% last year. In addition, approximately 10 million won had to be paid as a bonus each year.
GM Korea’s presence as GM’s compact car manufacturing base is dwindling, too. The focus of the automobile industry is shifting to electric vehicles at this moment and GM is transforming itself in line with the trend. The global demand for small and midsize SUVs GM Korea is currently producing or is about to produce is unlikely to go up.
Under the circumstances, it is predicted that the GM Technical Center Korea will be established next month and the establishment of the R&D arm will be followed by manpower reduction targeting factory workers as well as office workers. In this regard, unionized GM Korea workers had a meeting on Nov. 1, sharing her email with their coworkers.
In the meantime, GM Korea recently refused to talk with the workers with regard to the spin-off of the R&D unit. The company is planning to talk over the matter only with the Korea Development Bank (KDB), which is the second-largest shareholder in the company. The conflict between the management and the employees is likely to get even worse.
Earlier this month, the KDB proposed trilateral talks to GM Korea president Kaher Kazem and Yim Han-taek, head of the GM Korea Branch of the Korean Metal Workers’ Union. At that time, the KDB explained that a detailed discussion of the issue will help address the current situation and the three sides can meet on Nov. 13 to that end. However, GM Korea replied to the proposal with two-way talks.
GM Korea is likely to be criticized for ignoring the workers, who already expressed their will to join the three-way talks. The KDB appears embarrassed in that it cannot accept the company’s proposal without criticism from the workers.