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GM Korea’s production facilities in Bupyeong

The GM Korea labor union announced results on the afternoon of Oct. 16 showing 78.2 percent of members voting in favor of taking action in their dispute. Far exceeding 50 percent, the vote grants the union the right to strike if the National Labor Relations Commission (NLRC) decides on Oct. 22 to suspend mediation.

This new labor-management emergency comes just five months after the GM headquarters in the US reached a May agreement with the South Korean government to normalize GM Korea’s operations. It’s a disappointing development.

It all started with an Oct. 4 board meeting where GM Korea approved a motion to spin off the design center, technology research institute, and powertrain department at its Bupyeong head office into a separate R&D corporation.

GM Korea is scheduled to put the matter up for a final vote at a general shareholders’ meeting on Oct. 19. The union believes the move is intended as a gambit for staff cuts and restructuring ahead of an eventual withdrawal from the South Korean market.

The R&D corporation’s establishment is also being opposed by Korea Development Bank (KDB), GM Korea’s second-largest shareholder (at 17 percent). This shows there is some merit to the union’s objections. Three KDB-recommended directors reportedly voted against the move at the Oct. 4 board meeting, but this was not enough to overcome the seven GM-recommended directors, who were chosen according to ownership percentage.

KDB went so far as to apply for an injunction with Incheon District Court to bar the general shareholders’ meeting from happening; it is now awaiting a decision.

It is not good to have GM Korea pushing ahead unilaterally with the new corporations’ establishment against the wishes of the labor union, and even its second-largest shareholder KDB. Some US$750 million in KDB support money has gone into GM Korea following the May normalization plan. The reason the government made the decision to provide this support – despite critics maintaining that it was basically channeling taxpayer money into a private company – was to avert a mass unemployment scenario.

We hope they will keep in mind these kinds of labor-management frictions and shareholder disagreements could lead to catastrophe, especially with the prospects for the domestic and overseas automobile industries as bleak as they are. The argument that a separate corporation is necessary for better communication with the head office does not sound all that plausible.

GM Korea could face a blow to its reputation and even worse struggles as a business if more people come to believe it is gearing up for a “dine and dash” – soaking up support funds while preparing to pull up stakes and return home.

If it keeps adopting this kind of one-way traffic approach – trusting only in the 83-to-17 structural advantage it holds in equity terms – a backlash is almost certainly in store. GM Korea should pay close attention to what the stakeholders have to say.

Please direct comments or questions to [english@hani.co.kr]