By Kim Tae-gyu
WASHINGTON — General Motors CEO Daniel Akerson reaffirmed his plan to invest 8 trillion won ($7.4 billion) in South Korea over the next five years.
His remarks came during a roundtable meeting between President Park Geun-hye and U.S. business representatives, Wednesday (local time).
Akerson’s commitment to the plan gave Korean officials a sense of relief as he caused a stir this April by saying GM might consider shifting output from its Korean production base in the long-term due to the “security crisis.”
Back then, worries ran high because Pyongyang had threatened to make preemptive nuclear attacks on Washington and Seoul, following the imposition of stronger U.N. sanctions in the aftermath of its missile and nuclear test.
“Akerson promised to proceed with the investment schedule of building GM’s third design center in Korea,” said Cho Won-dong, Park’s senior secretary for economic affairs.
“It is an investment with great implications for us. Once the design center is established, it is expected to play a role as a design hub that covers all of Asia.”
South Korea is one of the carmaker’s largest overseas production bases as it makes around four out of 10 Chevrolet vehicles sold internationally.
GM rolls out about 6.5 million cars every year and among them 1.5 million are manufactured in its Korean factories with the vast majority being shipped abroad.
However, the CEO came up with two preconditions for “not abandoning Korea” — probably to urge the Park administration to actively deal with hitches in doing business.
He took issue with the weakening Japanese currency, which hurts the price competitiveness of its models produced in Korea, and a lawsuit over wages filed by union members.
“The first issue attests to the fact that GM’s interests are aligned to those of our economy. It will give a signal to the world (that the depreciation of the Yen must not continue),” Cho said.
“The second one is tricky. In fact, the wage lawsuit is not just a problem for GM but for Korea Inc. We will try to deal with it.”
The litigation is about lump-sum retirement payments. The union said that bonuses should be included in these, which would substantially raise the amount paid out.
Management is against the idea but the local courts have tended to side with laborers in recent verdicts. GM fears that such decisions will end up increasing its labor costs.
“If such demands become a social norm, Korean companies have to pay an additional 38 trillion won ($34.9 billion) to workers. Then, firms will raise the prices of their products, undermining competitiveness,” Cho said.