GM to gradually move away from South Korea as labour costs rise; next Cruze to be built elsewhere

gm korea

General Motors is slowly cutting its presence in South Korea amidst surging labour costs and militant unionism, Reuters reports, citing the US carmaker’s recent decisions to move production of newer models away from the world’s seventh-largest exporting nation.

The report adds that GM has told its South Korean labour union that it would not produce the next-gen Chevrolet Cruze in the country, although it has not said where it plans to shift production to (Spain is rumoured). The current model (pictured above) however, would continue to be built there as a low-cost car for developing markets.

Two individuals familiar with product development plans have told Reuters that the carmaker has also moved the Cruze’s lead development team out of Korea to its technical centre near Detroit.

gm korea

As for the updated Opel Mokka/Buick Encore model (current model pictured above), plans exist for a big chunk of production to be moved to Spain from the second half of next year, initially using kits from Korea. Like the Cruze, the current model would continue on in Korea.

“We need to make sure we mitigate risk in (South Korea), not over the next two to three years but over time, not to become too dependent on one product source,” an unnamed source told the news agency.

Reuters reports that GM Korea’s labour cost per vehicle is set to hit US$1,133 (RM3,700) this year, compared to an average US$677 (RM2,200) across GM’s global operations. The manufacturing sector’s total labour compensation per employee in South Korea has jumped 119% from 1999 to 2009.

gm korea

The issue of sharply-increasing labour costs has been made worse by the South Korean won’s recent relative strength. But GM Korea’s labour union believes the talk of pulling out is a bluff designed to scare workers against asking for pay rises, the report says.

Last year, the union had the worst walkout in a decade, resulting in a production loss of 48,000 vehicles or US$92 million (RM301 million), according to GM Korea. This eventually led to an annual wage settlement last month that included bonuses of 10 million won (RM29,500) per member.

Sources have told Reuters that the biggest potential threat to GM Korea’s continued competitiveness is union legal action seeking to redefine the meaning of ‘regular wage.’

gm korea

A South Korean high court ruled last year that regularly-paid bonuses should be counted as part of a worker’s ‘base pay,’ which is used to calculate overtime and pension payments.

The supreme court is currently reviewing the ruling, but GM Korea CEO Sergio Rocha has said that labour costs would rise 10-12% if it had to count bonuses as part of a worker’s regular pay.

South Korea has been one of GM’s main production hubs since it purchased Daewoo in 2002. The nation accounts for about a fifth of the US carmaker’s 9.5 million cars produced globally per year. More than 80% of the GM cars made there are exported.

Looking to sell your car? Sell it with Carro.

10% discount when you renew your car insurance

Compare prices between different insurer providers and use the promo code 'PAULTAN10' when you make your payment to save the most on your car insurance renewal compared to other competing services.

Car Insurance

Jonathan James Tan

While most dream of the future, Jonathan Tan dreams of the past, although he's never been there. Fantasises much too often about cruising down Treacher Road (Jalan Sultan Ismail) in a Triumph Stag that actually works, and hopes this stint here will snap him back to present reality.

 

Comments

  • The Korean has never learned… why in the earlier day Daewoo eaten up by GM and Kia went to Hyundai.

    The strong union could be one of the reason GM (USA) went bankrupt.

    Like or Dislike: Thumb up 6 Thumb down 1
    • Maserati(Official) on Aug 16, 2013 at 2:30 pm

      Chevrolet is nothing but a disguised Daewoo. And Daewoo is a failure company. Buy Chevrolet and you are really buying a Daewoo.

      Like or Dislike: Thumb up 5 Thumb down 10
  • gavin on Aug 16, 2013 at 1:40 pm

    what’s good about the cruze anyways, it seems like it’s still in the old age of poor korean cars, weak engine, cheap interior

    Like or Dislike: Thumb up 9 Thumb down 7
  • Please come to Malaysia

    *pity eye*

    Like or Dislike: Thumb up 10 Thumb down 4
  • azrai on Aug 16, 2013 at 2:37 pm

    GM, just take all the kit from Korea and bring it here in Gurun with Naza. The wages here is relatively small and the increase percentage is much lower compare to nation inflation percentage. meanwhile the Ringgit now steadily going into the ravine with current value at RM3.25 per USD. If you can’t afford the wages, think further, we can import cheap labour from nearby Indonesia, South Thailand, Cambodia, and even Bangladesh.We also don’t have strong union for any strike or whatsoever. The lower wage already covered by BR1M annually at RM500 by the government and will continue to rise to RM1200 in 4 years time.

    Like or Dislike: Thumb up 40 Thumb down 1
    • GM, please place the offer to the Malaysian Government with a condition – abolishment of NAP or a tax-free operation like Lynas.

      Looks like the Government is desperate in attracting foreign investors, therefore this is a right time to get in.

      Like or Dislike: Thumb up 12 Thumb down 2
      • Jimmy on Aug 16, 2013 at 9:31 pm

        Ok, the tax-free status save me GM a lot of money which I GM in return will give you as coffee seeds. Sama-sama menang, so approval please for me GM, don’t care what other people are saying, no proof anyway.

        Oh, I didn’t mention any words about Lynas; nothing was wrong with Lynas.

        Like or Dislike: Thumb up 4 Thumb down 0
    • Well said. You sir, deserve my like. Can’t even deny any of it. My country’s state T_T

      Like or Dislike: Thumb up 6 Thumb down 0
    • Jimmy on Aug 16, 2013 at 9:25 pm

      An educated open-minded Azrai bin
      I wish we have more Azrai in UMNO or cabinet.
      Read beyond words from Azrai.

      Like or Dislike: Thumb up 5 Thumb down 1
  • ss427 on Aug 16, 2013 at 2:50 pm

    That Malibu LTZ gal looks quite pretty :) But she needs to wear miniskirts and not long pants la… LOL and her top needs to be shorter..

    Oh back to cars, SG got the Malibu already after much delay. You need to see the car in person to appreciate its beauty and quality. Makes the XCV50 Camry looks like a toy

    Like or Dislike: Thumb up 2 Thumb down 2
    • CamryMan on Aug 16, 2013 at 11:27 pm

      mmm… the Malibu is so good… but yet the Camry sell so much more compared to Malibu… something must be not rite..

      Like or Dislike: Thumb up 1 Thumb down 3
  • gOOsh on Aug 16, 2013 at 2:57 pm

    either thailand or mexico maybe…
    malaysia? nnnaaahhhh….

    Like or Dislike: Thumb up 0 Thumb down 5
 

Add a comment

required

required