Union strike met with "investment suspension" countermeasure... Korea GM labor-management conflict 'worsening' (Comprehensive)

"Investment in Bupyeong Plant for Next-Generation New Products Put on Hold and Under Review"

Korea GM Bupyeong Plant (Photo by Yonhap News)

[Asia Economy Reporter Kim Ji-hee] “We will suspend and reconsider the expenditure related to the investment in the Bupyeong plant, which was scheduled for the production of next-generation global new products.”

The labor-management conflict at Korea GM is escalating rapidly. The management responded to the union's strike declaration by suspending investments. After struggling through the first half of the year due to the COVID-19 pandemic, the unstable labor relations have become a major obstacle, prompting the management to take a strong stance.

On the 6th, Korea GM stated, “In the first half of this year, we experienced a serious cash liquidity crisis due to production losses exceeding 60,000 units caused by COVID-19 and other factors. We have taken strong cost-cutting measures to secure liquidity and continue company operations and investments,” and announced that the investment plan for the Bupyeong plant will be suspended.

Since July, during the more than three months of this year's wage and collective bargaining agreement (Wage and Labor Agreement) negotiations, Korea GM has repeatedly emphasized this crisis situation, but the union remains unmoved. On the 23rd of last month, the union raised the flag of struggle by refusing overtime and special work, and subsequently started partial strikes on the 30th of last month and the 2nd of this month. At the Central Dispute Countermeasure Committee held the day before, it was decided to hold additional partial strikes for three days from today to the 9th and 10th.

Korea GM explains that due to production disruptions in the first half of the year and additional production losses caused by the union's industrial actions, there is no capacity for further investment. Korea GM estimates that the union's previous industrial actions caused production losses of more than 7,000 units, and with the recent additional industrial actions, the cumulative loss is expected to reach 12,000 units. Unable to bear the liquidity crisis caused by further production losses, the company has begun reconsidering the investment in the Bupyeong plant.

The investment plan currently suspended involves approximately $190 million (about 210 billion KRW) scheduled to be invested in Bupyeong Plant 1 starting next year. Korea GM plans to produce a new crossover utility vehicle (CUV) at the Changwon plant, and during the 19th negotiation session on the 22nd, proposed investing to manufacture a derivative model of this vehicle at Bupyeong Plant 1. However, immediately after this proposal, the union declared it “unacceptable” and began refusing overtime and special work.

Originally, Korea GM aimed to make this year the first year of performance recovery, led by the global new car Trailblazer. Having reduced operating losses from 614.8 billion KRW in 2018 to 332.3 billion KRW in 2019, the company aspired to break even this year. However, with the COVID-19 situation in the first half and recent labor-management conflicts, voices in the industry suggest that achieving this goal may now be practically impossible.

For now, since Korea GM is showing willingness to continue negotiations with the union, it remains to be seen whether the actual investment plan will be withdrawn. Industry analysts also suggest that this announcement could be a strong card by management to pressure the union amid the deadlock in the wage and labor agreement negotiations. However, since the union maintains a firm stance on issues such as the “two-year cycle wage and labor agreement,” it is uncertain whether future negotiations will proceed smoothly.

Some express concerns that starting with this investment suspension, Korea GM may reconsider its future investment plans one after another. Particularly, anxiety is growing as it became known that recently, Korea GM President Kaher Kazem mentioned that if additional production disruptions occur, the company may have no choice but to withdraw from the Korean market.

This content was produced with the assistance of AI translation services.