GM Korea Avoids Another Strike as Wages Rise 50% in Five Years

GM Korea auto show girls
Chevy Malibu [Photo GM Korea]

Staving off a strike for the second consecutive year, autoworkers at GM Korea have reached agreement on an additional pay increase.

The deal comes after GM Korea President and CEO Sergio Rochas warned workers to “stop this vicious cycle before it’s too late.”

The tentative agreement raises the basic monthly wage by only 83,000 won ($71) but includes a 4 million won ($3,400 USD) bonus and a one-time payment of 6.5 million won ($5,500 USD).


GM Korea offered the obligatory post-battle pleasantries.

“Both (parties) expressed a commitment to reaching a fair and reasonable agreement based on mutual trust and understanding,” the company said in a statement.

Perhaps giving a nod to Korean labors renowned negotiating tactics, GM told Reuters that the deal was reached in a “smooth and peaceful way.”

The company also ended speculation that they would scale back production at the Bupyeong plant located west of Seoul. GM said they will produce next-generation Chevrolet Malibu sedans on a second production line at the plant.


“We have no concrete plans to close factories in South Korea but, to remain competitive, GM Korea must find ways to drive efficiencies over time.”

Not everyone is happy with the new contract –only 55% of workers voted to approve the deal, according to a union spokesman.

With nearly half dissatisfied, how does this bode for the future? Perhaps more importantly, how much more is GM willing to pay to one of the most expensive automobile labor markets in the world?

Korea a major component of global GM production

GM’s South Korean operations were established in 2002 when the company bought failed local carmaker Daewoo Motors. At the time it was the perfect match: GM needed Daewoo’s small car technology –which the company sorely lacked, and Daewoo needed to be rescued from nonexistence.

The marriage went amazingly well, with GM Korea’s production now accounting for nearly one-fifth of GM’s total output globally.

GM Korea currently employs around 16,500 Koreans at four plants; three that produce vehicles and one producing transmissions. Korean operations represent one of GM’s seven fully integrated design, engineering and manufacturing operations worldwide.

In 2013, the Korean unit sold 151,040 vehicles in the domestic market while exporting more than 1.8 million vehicles to over 150 markets worldwide, according to GM.

First Chevy Malibu produced in 2011. [GM Korea]

First Chevy Malibu produced in 2011. [GM Korea]

Whispers of India

The contract dispute has passed, so now it’s all smiles on both sides.

“In collaboration with the union, the company is fully focused on achieving record sales in 2015,” GM Korea said in a statement.

But talk of a move to India still has to be on people’s minds.

Stefan Jacoby, GM executive VP of consolidated international operations, has made it clear that India is where the future of GM production is headed in Asia.

“Thanks to the low labor costs in India, 30 percent of the output, about 170,000 units, will be exported,” said Jacoby. “GM will increase the annual production capacity in India from the current 282,000 units to 570,000 units.”

GM India Plant

GM India ramping up operations with big investments. [GM India]

That’s still far below Korean production and Jacoby emphasized that the company has no plans to downsize Korean operations, but…

“We have no concrete plans to close factories in South Korea, but, to remain competitive, GM Korea must find ways to drive efficiencies over time.”

President and CEO Rocha, also denied any intention pull up their stake but…

“We worry about labor costs. In Korea, labor costs increased 50 percent over the past five years, which has weakened the competitiveness of the Korean auto industry.”

According to a union official speaking to Reuters, he participated in staff-only presentation that projected labor costs per vehicle in 2013 at $1,133. That compared to an average of $677 per vehicle across GM’s international operations –a sizable disparity.

In 2014 Rocha gave a quote to The Korea Herald in which the cognitive dissonance was deafening: “It is a sacrifice for the company, but good for the company.”

What this all means for the future of GM in Korea remains unknown.

One thing is for sure: Last week GM announced plans to invest $1 billion more in its India operations. This is part of a long-term $5 billion plan with Shanghai Automotive Industry Corp to develop India as a hub for Chevrolet vehicles aimed at emerging markets.

Fellow automaker Hyundai’s labor costs (2012)

Korean auto workers are some of the highest paid in the world.

Korean auto workers are some of the highest paid in the world.


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