GM Korea chief says labor issues often prevent investment

A lack of labor flexibility, continued industrial action and annual wage negotiations remain major challenges to doing business in Korea and attracting foreign investment, the chief of GM Korea said Thursday.

GM Korea President and Chief Executive Kaher Kazem said there are things to be improved to make multinational companies invest further in Korea.

He mentioned the Korea-U.S. FTA, Korea's stable economy, its manufacturing capability and highly competitive supply base as strengths for wooing foreign direct investment.

"Despite these strengths, there are challenges such as continued disruptive industrial relations, short-term cycle labor negotiations and uncertain labor polices, which drives uncertainty and escalation in cost and hinders investment," he said in an online seminar hosted by the Korea Automobile Manufacturers Association.

Citing a World Economic Forum report published in 2019, Kazem said Korea ranked 13th in terms of overall global competitiveness but ranked 51st in terms of labor market competitiveness and 97th in labor flexibility.

He said stable labor relations, flexibility and supply certainty are key to foreign companies' investment decisions.

GM Korea needs to respond fast to market demands and keep costs competitive as it exports more than 85 percent of the vehicles manufactured at its local plants, Kazem said.

"If we look to our peers, Korea lags in important labor practices and regulatory certainty. The bargaining cycle is one year in Korea when compared with the United States at 4 years. The pattern of experiencing consistent industrial action in Korea hinders investment," he said.

Partial strikes cost GM Korea about 25,000 vehicles in lost production in the second half of last year. The company already suffered output losses of 60,000 vehicles in the first half due to the impact of the Covid-19 pandemic.

GM has three Korean plants — two in Bupyeong District, Incheon, and one in Changwon, South Gyeongsang — whose combined output capacity reaches 630,000 units a year.

The Detroit carmaker owns a 76 percent stake in GM Korea, and the state-run Korea Development Bank and SAIC Motor hold a 17 percent stake and 6 percent stake, respectively, in the Korean unit.

For the whole of 2020, GM Korea sold 368,453 vehicles, down 12 percent from a year earlier.

Yonhap