Rising labor costs make GM consider South Korea pullout image

Sources familiar to GM report the American automaker is planning a gradual cut of its reliance on the country as the labor costs are mounting and the unions are getting more active.

According to the three sources, GM could already be putting to action its pullout plans, as recent decisions shifted new model production away from the plants in South Korea. The automaker seems keen on getting away from the country that now accounts for a fifth of its global production.

These decisions come as highlights regarding the complaints from both local and foreign carmakers about rapidly rising wage costs in the world’s seventh-largest exporting nation.

“We need to make sure we mitigate risk in (South Korea), not over the next 2-3 years but over time, not to become too dependent on one product source,” said one of the sources that declined to be identified due to the sensitivity of the matter. “If something goes wrong in Korea, whether it is cost, politics, or unions, it has an immediate impact.”

According to the sources, well placed inside GM’s Korean talks, said labor costs had risen sharply over the past decade, turning the country into a high-cost base, a problem which also relates to the local currency’s relative strength over the past year.

On the other hand, GM’s local labor union disagrees and believes the talk of reducing its presence is a bluff designed to intimidate workers against seeking further pay hikes. Last month, GM Korea reached an annual wage settlement that included bonuses of 10 million won ($9,000) per member, according to the GM Korea labor union.

via Reuters