GM Workers Sound Alarm Bells Over Possible Pullout

GM Korea workers on Thursday threatened to strike to protest against the automaker's plans to establish a research and development company which they fear are a precursor to pulling out of Korea.

The move came after the company announced that it will get the plans approved in a shareholders' meeting on Friday, but the union says it is a fig leaf for a gradual pullout of manufacturing.

To complicate matters, state-run Korea Development Bank, which is GM Korea's second-largest shareholder, is also protesting against the plans. KDB says it cannot understand why GM Korea needs to establish an R&D company here now instead of putting its promised investment into the manufacturing operation, and has threatened legal action.

GM headquarters promised to pump billions into GM Korea over the next five years in return for a lavish government bailout aimed at saving manufacturing jobs. But the union and banks suspect that this R&D company is a swerve aimed at keeping the promise without commitment to production lines.

The biggest problem facing GM Korea is its dire sales. The company has been deeply in the red since 2012 and is expected to post a record deficit in the W1 trillion range this year (US$1=W1,135).

The only time GM Korea achieved a profit was in 2013. But cumulative losses from 2012 to 2017 stand at W2.5 trillion and are expected to reach W3.5 trillion this year. GM shut down the Gunsan plant because it was running at only 20 percent capacity.

In May the government and GM agreed to pump in US$7 billion, but there is simply not much of a market for American cars wherever they are produced.

GM Korea has so far been responsible for developing subcompact cars and small SUVs for the Korean market, but now headquarters wants to entrust the new R&D company with developing a new compact SUV for the global market.

GM Korea claims that the R&D company is part of efforts to improve revenues and wants to transfer around 3,000 R&D staff to it. But the union fears that the other 7,000 workers will eventually lose their jobs as the manufacturing operation is shut down.

In a vote earlier this week, 78 percent of unionized workers voted against the R&D company and in favor of a strike. KDB also filed for an injunction to halt the shareholders' meeting, but a court rejected it. Now KDB is seeking to use its veto to block the move.

GM Korea insists the R&D company will boost its competitiveness. It plans to halt production of subcompacts in 2022, so it needs to find new projects for the R&D staff who have been in charge of developing them. Management said the union is reacting too sensitively, since headquarters pledged in May to keep its factories in Korea for the next 10 years.

But unionized workers said laying off assembly-line workers will become easier once the R&D company is established. GM headquarters, meanwhile, warned that putting the R&D operations at the mercy of militant unions would only harm any development for the global market.

Industry watchers are also suspicious of the move, speculating that GM headquarters is creating a path to exit Korea by deliberately fomenting conflict. GM did not raise the plan for the R&D company in bailout talks with KDB and government here back in May. Moreover, as part of a global strategy it has been shutting down factories in Australia, Europe, Indonesia and Thailand since 2013.

KDB, which has pumped W800 billion into saving GM Korea, seems unable to flex its muscle in the boardroom, and a lawsuit would take one or two years.

Lee Hang-koo at the Korea Institute for Industrial Economics and Trade said, "GM does not find Korea attractive because of the continued losses. The issue was only patched up in May, but the fundamental problems remain."