GM Korea’s 2024 sales likely to be slowed due to lengthy labor strikes

GM Korea Co., the South Korean unit of U.S. auto giant General Motors Co., is facing increasing disruptions in vehicle production, overshadowed by a lengthy strike over wage increases.

If work stoppages continue at the current level, the Korean company may not be able to meet its annual sales target, which could also have a negative impact on Korea’s overall auto exports this year, analysts say.

According to the Korea Economic Daily, union members at GM Korea have stopped working overtime since July 1 and began a partial strike on July 8, resulting in a production loss of 11,130 units in the first 14 days of this month.

According to sources, GM Korea’s union is determined to continue its partial strike until management comes up with a “satisfactory” proposal – a move that could result in production losses of over 20,000 units this month alone.

Unionized workers are reportedly demanding a base salary increase and a performance bonus equal to 15 percent of GM Korea’s 2023 net profit, which amounts to 1.5 trillion won ($1 billion).

THIS YEAR’S SALES TARGET

GM Korea, the largest foreign investor in the Asian country, has set its sales target for this year at 529,200 vehicles, 13 percent more than last year (468,059 units), based on expectations of increasing demand from North America.

However, the Korean subsidiary of the Detroit auto giant experienced operational disruptions for half a month because wage negotiations had failed.

After rumors that GM Korea would withdraw from Korea due to weak sales, GM Korea’s sales rose to an all-time high of 13.73 trillion won last year, up 52% ​​year-on-year. Operating profit rose 388% to 1.35 trillion won in 2023, buoyed by strong exports of its two flagship SUV models – the Trailblazer and the Chevrolet Trax crossover.

After years of bloodshed, GM, the US headquarters, after consultations with the Korean government, worked out a plan to normalize business in 2018, which included the sale of its Gunsan plant.

GM currently owns 76 percent of GM Korea, while the state-owned Korea Development Bank is the second largest shareholder with a 17 percent stake.

GM has three plants in Korea – two production lines in Bupyeong west of Seoul, one in Changwon in South Gyeongsang Province and another in Boryeong in South Chungcheong Province.

Most of the vehicles manufactured by GM Korea are exported. Some models are sold in Korea under the Chevrolet brand.

GM KOREA PLAYS KEY ROLE IN KOREA’S AUTO EXPORTS

GM Korea plays a key role in Korean vehicle exports.

According to the Korea Automobile & Mobility Association (KAMA), the Trax crossover produced at GM Korea’s Changwon plant topped the list of Korean vehicle exports last year with 216,833 units, overtaking longtime export leader Hyundai Motor Co.’s Kona SUV, which exported 212,489 units.

The Trailblazer, manufactured at GM Korea’s Bupyeong plant, took second place with 214,048 units in 2023.

In the first half of this year, GM Korea’s domestic sales fell 29.1% year-on-year to 13,457 units, while exports rose 31% to 256,000 vehicles, leading to a 25.7% increase in total sales.

Exports accounted for 95% of GM Korea’s total sales in the first half of the year.

Industry officials said a continued strike would likely have a negative impact on Korea’s vehicle exports.

“The production disruption at GM Korea is not just a problem for the company alone. It will also have a significant impact on Korean automobile exports,” said an industry official.

In the first half of the year, Korea’s vehicle exports rose 3.8 percent year-on-year to a record $37.1 billion.

GM Korea accounts for about 20 percent of Korean automobile exports.

Industry observers said GM Korea’s 273 auto suppliers could also be hurt if the labor dispute drags on.

“We are concerned that the strike at GM Korea will lead to job losses as some suppliers are already suffering from liquidity problems,” said Moon Seung, CEO of Dasung Co. and chairman of the GM Korea Parts Suppliers Association.

Write to Jung-Eun Shin at [email protected]
In-Soo Nam edited this article.