Downsizing Continues as Sales Remain Sluggish
GM Korea Co., the South Korean unit of General Motors Corp., has halved the number of foreign executives since the launch of a massive restructuring drive last year. The company is also planning to carry out an early retirement program for its 100 Korean executives due to the labor union’s request for burden sharing and a restructuring decision by the U.S. headquarters.
GM Korea reduced the number of expatriate executives from 36 last year to 18 as of the first half of this year. The firm agreed to downsize the workforce in return for an emergency funding of US$7.15 billion (8.68 trillion won) from the U.S. headquarters and the Korea Development Bank (KDB) in May last year, and it slashed the number of employees by half over the past year. A GM official said, “Only some executives moved to new subsidiaries and the Asia-Pacific headquarters, but most of them resigned.”
GM Chairman Mary Barra announced the company’s restructuring plans at the end of last year to shed 18,000 jobs in its North American operations, such as the United States, Canada and Mexico, as well as cut the number of executives by 25 percent. The size of executive layoff in GM Korea is nearly two times that of the company’s U.S. headquarters. Since GM Korea got a chance of revival with financial support from the U.S. headquarters and the KDB after making a loss for five years in a row, it is undergoing more severe restructuring.
GM Korea, which has completed the reduction of foreign executives, is now planning to lay off about 100 Korean executive directors and managing directors. As it shut down the Gunsan plant last year, shedding 13,000 jobs, and simplified its lineups from the reduction of car models, the firm believes that it does not need as many executives as it did in the past. This is also part of its plans to raise bargaining power by accepting the request from the labor union for sharing the burden.
GM Korea has pledged to unveil 15 new models and partially altered models by 2023. The company’s main car models to be produced in South Korea in the future will be the Malibu midsize sedan, the Spark subcompact car, the Trax compact sports utility vehicle (SUV) to be discontinued in the near future, the Trailblazer compact SUV to be released next year and a crossover utility vehicle to be manufactured at the Changwon plant in 2023. GM Korea currently imports the Malibu Turbo model and mid SUVs from the United States. It will also import the Colorado midsize pickup truck and the Traverse full-size SUV from the United States. The ChevroletTahoe full-size SUV is highly likely to be included in the lineups next year.
In this case, only two models – the Trailblazer and a new CUV – will be newly produced in South Korea. Therefore, GM Korea won’t need many Korean executives in the production, planning and strategy sectors as it did in the past. In particular, the company is expected to accelerate restructuring on executives as the Chevrolet brand has been registered at the Korea Automobile Importers & Distributors Association (KAIDA). It will accept requests for voluntary retirement from not only executives but also 500 office workers at the manager level.
During a press conference held at the head office in Bupyeong in June, Kaher Kazem, president of GM Korea, said, “We have created surpluses on a quarterly basis.” An official who is well acquainted with GM Korea said, “The Traverse which is popular in North America will be a great success only when it sells 600 units a month just like its competitor Ford Explorer. If the Trailblazer is exported as the Trax did in its heyday, GM Korea, which has raised its efficiency by closing down its plants and downsizing its workforce, will be able to revive.”