Risking Loss of Consignment Manufacturing Contract
Renault Group of France and General Motors (GM) of the United States may not renew a consignment contract with their Korean subsidiaries for the production of a new model due to their high costs and low efficiency. Yet the labor unions of Renault Samsung and GM Korea are playing hardball, demanding pay raises. .
The global GM headquarters was expected to reorganize the line-up of the Chevrolet Trax which accounts for half of GM Korea’s sales, said sources in the Korean automotive industry on Feb. 11. The Trax, the flagship product of GM Korea factories, is expected to be divided into the TrailBlazer and the Tracker. Auto industry watchers predict that the Tracker, which will get bigger than the Trax, will focus on the Chinese market, while the Trax will be changed into the TrailBlazer and be expanded in size.
Accordingly, GM Korea’s Bupyung 1 Plant is likely to continue to roll out the Trax as an old model. GM Korea plans to produce a new sports utility vehicle (SUV) at Bupyung 1 Plant next year. If the SUV is not the TrailBlazar, it will be a big problem. Last year, GM Korea sold 239,800 units of the Trax, which amounted to 51.8 percent of its total sales (462,871 units). As new models, the Tracker and the TrailBlazer are expected to take the export markets of the Trax. If Bupyung 1 Plant receives a third model other than the two, it will be inevitable for the plant to prune its production volume.
It goes the same for Renault Samsung. The Nissan Rogue, which accounts for 47.1 percent of the carmaker’s total production, will be discontinued in September this year. France’s Renault is weighing where to produce a follow-up model of the Rogue. The labor cost of Busan Factory in Korea is said to be about 20 percent higher than that at Kyushu Factory in Japan. In the worst case, Busan Factory can lose over 50 percent of its work to Kyushu Factory.
However, the labor unions of GM Korea and Renault Samsung are stepping up their struggle by threatening a general strike against the moves of their global headquarters. The GM Korea labor union is expected to spark off a bigger conflict with the management by including a demand for living expenses for workers at the closed Gunsan Plant in its collective bargaining for this year.
Renault Samsung unionists have been continuing a partial strike, demanding a 100,000 won increase in base wage and a special incentive of 3 million won.
Industry experts say that an internal political strife at the labor leadership is compelling the labor union to take a hard line. The current GM union leadership inaugurated after previous union executive resigned in February 2017 as a result of hiring and delivery corruption. The current union leaders will see their terms of office end in February of next year so new leaders will be elected at the end of this year. Already, unionists in the field are posting posters on walls, criticizing the leadership for failing to prevent the shutdown of Gunsan Factory and the spin-off of an R&D corporation from GM Korea.
The new leadership of Renault Samsung newly formed last December, will face internal criticism if it fails to have the management raise wages. Renault Samsung got out of the red by securing the production of the Nissan Rogue in 2014. For the following three years, the labor and the management peacefully completed wage negotiations this time whatever it takes. In the coming wage negotiation, unless the labor union leadership succeed in having the management raise wages, the support base for them is likely to collapse internally. Even in the crisis that half of their work will disappear right now, the labor union has little choice but to wage a hard-line struggle like “a baby in the woods” as the labor union urgently needs to beef up its internal base.