Dealing with GMGM International President Barry Engle met with Hong Young-pyo, chairman of the Environment and Labor Committee at the National Assembly, and other lawmakers from the ruling and opposition parties Tuesday. He mentioned the possibility of assigning the production of two new models of cars to its plants in Bupyeong and Changwon. He also said General Motors will try to maintain GM Korea’s annual output at 500,000. We hope his remarks are true.
However, as a precondition to avoid GM leaving Korea entirely, he obviously wants government support and concessions from the labor union of GM Korea. The details of the preconditions have not been disclosed. But the foreign media reported that GM is demanding $1 billion in government subsidies and tax benefits over the next seven years in return for the $2.2 billion GM lent to GM Korea.
In response, the labor union of GM Korea demanded that the government reconfirm GM’s willingness to invest in Korea, allow the union to participate in scrutinizing the financial condition of the company, and release the agreement between GM and the Korea Development Bank (KDB), GM Korea’s second-biggest shareholder. The union also demanded that GM Korea withdraw its plan to shut down a plant in Gunsan, convert all its debts into equity, and ensure a roadmap for new car models being made here.
The ball is in the government’s court. It must first check GM’s willingness to invest and improve its local performance over the long haul and consider the survivability of its local plants. The government must also convince the union of the need for restructuring and pain sharing. Without clarifying such issues, any subsidy using the people’s tax payments will surely face a public backlash.
GM Korea’s recovery depends on a smooth settlement of the ongoing wage negotiations between labor and management. At the moment, GM has the upper hand. GM has based its decision to assign new cars to its Korean plants on “meaningful progress” in the negotiations by the end of February. The public can hardly understand why its employees have been receiving over 10 million won ($9,315) in annual bonuses for five years in a row despite its snowballing losses.
What worries us is politicians’ intervention. If they distort the crisis in Gunsan with political logic, the problem gets out of control. Political circles must refrain from making excessive demands ahead of the June 13 local elections and the government must wisely negotiate with GM.
JoongAng Ilbo, Feb. 21, Page 30