Proven Expertise
The global competitiveness of GM Korea seems to be regaining credibility as illustrated by the decision to manufacture subsequent models of the Chevrolet Cruze, first introduced at the Beijing Motor Show last April, at GM Korea's Gunsan factory.
General Motors Company of the U.S., manufacturer of Chevrolet Cruze, previously eliminated Korea when deciding on its manufacturing base for following models of 2012 Chevrolet Cruze. However, this situation has completely changed, as GM Korea proposed its labor union to produce the following models of the Chevrolet Cruze at its Gunsan factory, a totally unexpected development. The automobile industry is trying to figure out why global automaker GM changed its mind on such a major issue.
This probably shows that GM has been deeply worried about the recent recalls of tens of millions of vehicles because of critical quality defects. GM recalled 30 million cars due to automobile device defects during the first half, and CEO Mary T. Barra was summoned to congressional hearings. Furthermore, an additional 414,000 vehicles were recalled due to troubles in seat height adjusting bolts, and another 124,000 vehicles were recalled due to troubles in seat loops on July 25.
All told, GM had to pay US$2.5 billion to cover recall costs, and will have to afford even more. Under the current circumstances, GM headquarters had to examine the quality controls of all manufacturing facilities in 160 locations worldwide. GM's headquarters might have chosen the Korean factory again because of low defect rates. According to GM Korea, only 1 percent of all recalled vehicles in North America were from the Korean factory.
GM Korea expects more production allocation afterwards, if they successfully manufacture the new Chevrolet Cruze. In fact, before GM decided to withdraw the Chevrolet Europe brand, one quarter of all Chevrolet production was on GM Korea.
The new Chevrolet Cruze production plan at the Gundan factory played a very important role in ordinary wage negotiations. This became a casting vote while the company and labor union were in sharp conflicts regarding when to apply expanded ordinary wages. GM headquarters were concerned about unexpected variables such as strikes when they considered Korea as the major candidate for new Cruze production. This is why GM Korea moved so decisively to prevent strikes, even proposing to expand ordinary wages to the labor union for the first time in the industry.
GM Korea currently has final automobile manufacturing facilities in Bupyeong, Gunsa, and Changwon, and a transmission producing facility in Boryeong, Chungnam. Looking at the maximum production throughout a year, 390,000 vehicles are from Bupyeong, 240,000 from Gunsan, and 200,000 from Changwon. Gunsan factory has been manufacturing the Chevrolet Cruze and Orlando. Considering that the total exports from GM Korea were 630,000 vehicles, Gunsan factory is currently below full operation. The increase of production allocation is very good news in many ways.
A GM Korea employee said, “We do not know if we could have more production allocations afterwards, but this new Chevrolet Cruze production allocation is very encouraging to us. Since we have reached a mutual agreement on sensitive issues such as ordinary wages between the management and labor union, the only thing left for us to do is enhance product quality.”