A new hope for Gwangju

GM Korea’s Gunsan factory in North Jeolla, built in 1997, became the shortest-lived factory in the country when it closed down on May 31. In its heyday, the factory had 1,800 workers and supplied work for over 10,000 employees at various subcontractors. The city of Gunsan, with a population of 270,000, has been devastated by the closure of another major workplace after the shutdown last year of a shipyard of Hyundai Heavy Industries. The city’s population has thinned, real estate prices fallen and shops shuttered.

In the meantime, Hyundai Motor Group announced it was mulling over building a new factory in the city of Gwangju. The union and management agreed on a payment that is about half the average salary of the local auto-making industry to create new jobs in the city. The factory will pay its workers 40 million won ($37,364), compared to the 92 million won that other Hyundai Motor production workers get a year.

The experiment brings fresh air to the domestic automobile industry known for high labor costs and low productivity. Over 12,000 jobs could be created if the factory with the capacity of rolling out 10,000 units a year.

But it remains to be seen how the experiment will go as the overall automobile factory operation rate is underperforming due to sluggish sales. The Hyundai Motor union is also fretting about losing their work to the new factory thanks to its lower production cost. Gwangju would be the largest stakeholder while Hyundai Motor invests and assigns work. The experiment, however, can set a new model for the Korean manufacturing sector if it succeeds in reducing production costs.

Regional governments that are home to the office and factories of Samsung Electronics and SK Hynix are rich with tax revenues thanks to the semiconductor boom. The opposite fortunes of Gunsan and Gwangju underscore how important the role of companies and jobs are.

JoongAng Ilbo, June 4, Page 30