Korea’s auto industry in crisis

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Korea’s auto industry in crisis

About 240 senior union members of GM Korea will take Friday off in protest of the company’s plan to spin off its research, development and design division. Employees suspect that the move is part of the Detroit-based automaker’s long-term plan to ditch production operations and leave the R&D unit in Korea. The union opted to take a collective day-off because its motion for a full strike was struck down by the National Labor Relations Commission on the grounds that a strike against a management decision is against the law.

GM Korea employees resorted to laying down their tools because their shareholders pushed ahead with the spinoff plan without any effort to explain the need for realignment. GM Korea did not even fully brief the Korea Development Bank (KDB), its second-largest shareholder with a 17 percent stake, and endorsed the plan with the absence of the state lender. KDB also did not make an effort to probe the matter even when it learned of the spinoff plan five months ago.

However, the strike by GM Korea’s union won’t likely earn much sympathy from the general public. The Korean automaking industry is in a structural crisis. Korea’s output, which had been the world’s fifth largest until 2015, has fallen to eighth. Carmakers are abandoning Korea due to poor productivity versus notoriously high wages. GM Korea and Renault Samsung are in a position to bring in overseas brands to keep up sales in Korea. A reduced output of finished cars has wiped out nearly 10,000 jobs at automobile and parts assembly lines this year. The government is packaging up nearly 3 trillion won ($2.6 billion) in rescue money for parts makers.

In order to save the automobile industry with 390,000 jobs at stake, Korean workers must erase their reputation of demanding high wages despite poor productivity. The choice of GM Korea’s union to enter the strike has only cemented that image. Habitual strikes have become an annual event at the expense of the competitiveness and the name of local car brands. Labor and management must work together to dramatically improve productivity.

Few companies would want to leave Korea if they can make more cars with the same money. The union won’t have any excuse if it resorts to strike instead of trying to improve productivity. Without a fundamental change in the production line, the tragedy of GM Korea will never be over.

JoongAng Ilbo, Oct. 24, Page 30
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