The union’s role in GM’s fall

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The union’s role in GM’s fall

General Motors is expected to file for bankruptcy protection today (Korean time). It is the equivalent of what Koreans know as a court receivership - a process of letting the public know that the company has officially crashed and needs public support to return it back to health.

It is a shocking blow to the United States. GM was long a symbol of strength and the pride of the world’s largest economy. Who could have imagined that the juggernaut that ruled over the world’s auto industry for over 70 years could crumble to dust like this?

Despite the bankruptcy protection, there is no guarantee that GM can be brought back to life. The U.S. government could get its factories operating again with an injection of an astronomical amount of money, but it may still be difficult for the automaker to regain its position as the world’s No. 1.

If the entire production system collapses with successive bankruptcies of auto parts manufacturers and consumers shun the already-tarnished brand, GM might have to depend on life support indefinitely.

There are some lessons to be learned from the collapse of GM. Its decline is often attributed to inefficient production, inability to overhaul its management and a failure to read the changes in the market. But we see the union’s frequent strikes and its excessive demand for improved working conditions as the decisive factors. In particular, the payment of pensions and medical insurance to retirees and their families was what led the company to lose competitiveness and perform poorly.

This is a good lesson for Korea.

Local automakers need to do their utmost to upgrade their technology and update their management skills. But the more important thing is to get the labor unions to depart from their old mindset. It means the unions must abandon their hard-line stance.

Unions’ frequent walkouts and excessive demands are certain to ruin a company. The once-invincible GM failed due to that, so local companies should see it as a highly possible scenario.

The situation at Ssangyong Motors, Korea’s smallest automaker, where a massive strike is underway due to its mounting debt, is worrisome. The company’s union must know that the company will collapse unless its creditors and the government support it, and that support will soon be suspended if the strike continues.

To survive, the union should stop its strike. It should accept the management’s restructuring plan and go back to the production lines.

Killing all to save all is the last folly it cannot afford to commit.

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