Thursday, February 27, 2020
Labor Disputes at GM Korea, Renault Samsung Fueling Concerns about S. Korea's Auto Industry
Strikes Taking Toll on Sales
Labor Disputes at GM Korea, Renault Samsung Fueling Concerns about S. Korea's Auto Industry
  • By Jung Min-hee
  • October 1, 2019, 09:20
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Unionized workers of GM Korea hold a rally for a wage hike.

GM Korea Co., which had come close to filing for court receivership due to a conflict between labor and management last year, is now facing labor union risks once again. The company is experiencing a delay in production, and domestic sales, which have bounced back in the second half, are directly hit by strikes.

GM Korea's unionized workers staged all-out and partial strikes for 124 hours from the beginning of this year. This resulted in a production setback of 20,000 units, with the damage estimated at 400 billion won (US$333.61 million).

Unionized workers at GM Korea have continued the strike for an increase in wages from early September. The company has clearly said it cannot accept the labor union's request for a higher basic monthly salary, performance-based pay and improved welfare benefits. Accordingly, there are growing concerns that the dispute between the labor and the management can lead to a management crisis like last year again.

An official from an automaker said, “GM Korea had rumors about withdrawing from the South Korean market after the management and labor failed to reach an agreement on wages last year. If the company has difficulty in management due to the dispute between the labor and the management this year once again, it can be the cause of scaling down the business, including the reduction of production.”

In fact, GM International Operations Senior Vice President Julian Blissett visited South Korea in August and said, “The headquarters will have no choice but to assign some vehicles to be manufactured in South Korea to plants in other countries if the union continues its strikes.”

The problem is that the union's strike is taking a toll on domestic sales which have barely managed to recover. The labor union is even boycotting sales of GM cars, adversely affecting consumers’ purchasing mentality, according to GM Korea. As a result, the company expects that domestic sales of GM cars will barely surpass 5,000 in September. GM Korea decreased the fall in sales on-year in July and August and sold more than 6,000 units a month on average.

Renault Samsung Motors Corp. is also not free from labor union risks. The company is carrying out restructuring for the first time in seven years and the labor union is one of the biggest causes of the current situation, according to market experts.

The labor union staged all-out and partial strikes for over 300 hours from October last year to June this year and the company’s exports dropped 40,000 units this year. In addition, it is now uncertain that Renault Samsung will be able to secure production of follow-up models for exports which were highly likely to be assigned to the Busan plant for production.