Lessons from the GM-Renault union

In automobile industry, more than 30,000 parts are modularized and assembled in the factory. Workers make cars in an integrated process, so the labor union has great influence. It takes more than four years and hundreds of billions of won to develop a new model, but in order to survive the fierce global competition, various new models need to be introduced in timely and flexible fashion for each region.

Because of this characteristic of the automobile industry, the key global competitiveness depends on the cooperative labor-management relationship to flexibly respond to market condition and the wage level that secures price competitiveness. Therefore, leading global makers have changed the labor relationship to be a mutually cooperative paradigm, establishing labor flexibility and performance-based wage system.

After the bankruptcy crisis in 2009, GM has recovered competitiveness as the labor union accepted wage and benefit cut, dual pay system and ban on strike longer than a certain period.

Volkswagen was faced with production decrease in Germany due to high wage and overseas production around the 2000s. The union accepted flexible labor and effective wage cut through working time account system and work sharing, and the company agreed to expand employment. As a result, Volkswagen’s domestic production increased by 50 percent from 1.58 million cars in 1993 to 2.38 million cars in 2014.

Renault relocated production plants to Spain and Romania to dodge the union’s demand for wage increase, and the production in France plummeted from 1.33 million in 2002 to 510,000 in 2013. When the rate of plant operation in France fell to 55 percent, the union chose to change for survival. In 2012, the union agreed to freeze the wage and extend the work hours, and thanks to their efforts to maintain employment, the production in France began to increase in 2014.

Bob King, former president of the United Auto Workers of the United States, said that in the global competition, confrontation between union and management is unproductive and that they should be allies, not enemies. However, the labor relations in the Korean automobile industry have long been trapped in the outdated frame and has hostile reputation worldwide. The size of automobile production in Korea has remained stagnant for years, and it could shrink anytime. Employment is just as unstable.

If Korea wants to continue the status as one of the automobile production leaders, the labor-management relationship must be changed progressively. Korea’s unions need to make a decision as an economic entity to lead the reform and contribute to guaranteed employment, creation of new jobs for the young people and development of local economy. It is their duty to the citizens who have purchased and loved Korean cars and supported the automobile industry. Then, the unions will be able to continue developing amid a storm of applauses.

by Kim Yong-geun, President of Korea Automobile Manufacturers Association