Endless walkouts fuel fear of GM's withdrawal from Korea

By Jhoo Dong-chan

Speculation about General Motors’ possible departure from the Korean market has been a regular topic every summer when workers belonging to the union at GM Korea stage a walkout demanding more wages and benefits.

For the past 15 years since General Motors took over Daewoo Motors to establish GM Korea in 2002, the American carmaker’s affiliate here has struggled to survive against a series of challenges.

The situation has turned especially worrisome this year not only over GM Korea’s domestic issues but also for a series of unfavorable overseas factors.

However, the union at the company is staging its annual event again this year. And industry observers say that it’s not the time for a dispute but for cooperation since the Detroit head office is feared to call it a day if such a trend continues.

GM Korea has suffered losses for the past three years. It netted losses of 353.4 billion won ($310.2 million) in 2014, 986.8 billion won in 2015 and 631.5 billion won last year. Its 2016 balance sheet showed debt of 1.29 trillion won.

It also suffered a 258.9 billion won loss in the first quarter of 2017.

GM Korea introduced the Cruz compact sedan earlier this year to seek a rebound, but failed to see great sales.

The carmaker’s second-largest shareholder, the Korea Development Bank, said it cannot stop Detroit’s decision if it decides to shut down the Korea operation. General Motors has withdrawn its unprofitable overseas operations since CEO Mary Barra took office in 2013.

Shortly after Barra was appointed to the post, General Motors shut down its operations in Australia, Indonesia and Russia. It also announced its plan to sell its European Opel brand to France’s PSA Group.

General Motors decided to withdraw from the Indian market in May and from the South African market shortly after that.

These decisions followed its poor sales in those markets.

General Motors sold only 25,823 cars in 2016 in India, down more than 20 percent from the previous year. Its market share was less than 1 percent. The carmaker said it departed from India to concentrate on the big two _ the U.S. and China.

Barra then said General Motors will continue its operation in Korea, but GM Korea’s financial status and its sales have been deteriorating rapidly.

Already shouldering 1.29 trillion won of accumulated debt since 2014, GM Korea’s overseas sales in the European market have also dramatically declined along with General Motors’ selloff of its assets there.

Due to the headquarters’ decision to downsize its overseas operations, GM Korea, which exported 620,000 cars in 2013, sold just 410,000 cars overseas last year.

GM Korea said it will concentrate its capacity on exporting vehicles to other markets, but had to manage a blow with its European partner Opel gone. And industry observers say General Motors may not maintain GM Korea’s production capacity considering its costs.

In the meantime, General Motors recently appointed former GM India President Kaher Kazem as its new president and CEO, effective Sept. 1.

What’s most worrying about Kazem’s appointment to the post is his track record.

Kazem led General Motors’ withdrawal and selloff of operations in India. He decided to sell off its production plants in Gujarat in March, and then cancel the carmaker’s $1 million plan to expand its production line in India in May, announcing a de facto withdrawal from the market.

Despite the company’s ominous external factors, union workers at GM Korea decided to stage a walkout last month. They demanded raising their basic salary by 154,883 won, a 500 percent incentive payment, while reducing night shift work by one hour.

“I don’t’ think GM Korea workers fully understand the gravity of the situation,” an industry insider said. “They are now running the risk of losing their jobs. If GM Korea leaves, the impact on the nation’s economy will be great considering the company’s partners and subcontractors.”