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(2nd LD) GM executive warns of possible exit from S. Korea amid strikes

All News 17:01 November 19, 2020

(ADDS: ADDS KDB's statement in 10th para)

SEOUL, Nov. 19 (Yonhap) -- An executive of General Motors Co., the parent company of GM Korea Co., said the U.S. automaker could withdraw from South Korea if workers at the Korean unit continue to go on strike for wage hikes amid the COVID-19 pandemic, according to GM Korea Thursday.

GM Korea workers have been staging several rounds of partial strikes since Oct. 30, demanding an end to a wage freeze and a new vehicle production plan at its No. 2 Bupyeong plant in Incheon, just west of Seoul.

The persistent industrial action has cost the company 17,000 vehicles in lost production, and the number is expected to reach 20,000 by the end of the week, Steve Kiefer, president of GM's international operations, told Reuters.

"We're basically being held hostage in the short term by lack of vehicle production. That's having a very significant short-term financial impact," he was quoted as saying,

He said the strikes would basically make it impossible for the Detroit carmaker to allocate any further investments or new products to Korea.

"It's making the country non-competitive. It's going to have long-term effects if we can't get this resolved in the coming weeks," he said.

This file photo, taken on Feb. 17, 2020, shows GM Korea's Bupyeong plant in Incheon, just west of Seoul. (Yonhap)

This file photo, taken on Feb. 17, 2020, shows GM Korea's Bupyeong plant in Incheon, just west of Seoul. (Yonhap)

The union's extended strikes come after the company said early this month that it will reconsider investing in the main Bupyeong plant for the production of a next-generation vehicle for export if the union continues to strike and affect production.

GM Korea already suffered over 60,000 vehicles in production losses in the first half amid the pandemic, with output losses caused by the partial walkouts through Friday estimated at 20,000 units.

The state-run Korea Development Bank (KDB), the second-biggest shareholder in GM Korea, has said an extended strike will thwart the company's efforts to put its business back on track.

"We urge the company and the union to make concessions to move forward as their ongoing dispute is having a major impact on its subcontractors and the local economy," the KDB said in a statement.

GM owns a 67 percent stake in GM Korea, and the KDB holds a 17 percent stake in the Korean unit.

At stake is the company's proposal to have wage talks every two years, not once a year, to reduce uncertainties ahead. The proposal was rejected by the union, which wants to stick to a one-year deal.

The company suggested providing a revised 8 million won (US$7,200) in cash bonuses per person in 2020 and 2021 if the union accepts the biennial wage talks proposal.

The union asked the company to raise the basic pay by 120,000 won per worker and offer four months of salary as a bonus and 6 million won in cash, while demanding a new vehicle production plan at the No. 2 Bupyeong plant after 2022.

The union argues there should be a new vehicle to replace the Trax compact SUV and Malibu midsize sedan currently being produced at the plant.

But the company has balked at the demands, citing the unfavorable business environment caused by the pandemic and steady demand for the models in global markets.

The Detroit carmaker has three Korean plants -- two in Bupyeong and one in Changwon -- whose combined output capacity reaches 630,000 units a year.

GM Korea's operating losses narrowed to 332 billion won in 2019 from 615 billion won a year earlier. It sold 417,226 vehicles last year, and sales stood at 300,352 units in the January-October period this year.

This year's sales are expected to fall far short of the 2019 sales figure due to production losses driven by strikes.

In May 2018, GM and the KDB signed a binding agreement that will permit a combined 7.7 trillion-won lifeline -- 6.9 trillion won from GM and 810 billion won from the state lender -- to keep the Korean unit afloat amid low production rates and poor sales.

Under the deal, GM is banned from selling any of its stake in GM Korea until 2023 and is required to keep its holding in the unit above 35 percent until 2028.

It would be hard for GM to quit South Korea in the short term, but the long-term future is in doubt, Kiefer said.

(2nd LD) GM executive warns of possible exit from S. Korea amid strikes - 2


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