Automobile Industry Association "Concerns Over Deepening Labor-Management Conflicts in the Car Industry Amid COVID-19 Crisis"

"Obstruction to Korea GM's Management Normalization... Concerns Over Liquidity Crisis for Partners"

Korea GM Bupyeong Plant (Photo by Yonhap News)

[Asia Economy Reporter Kim Ji-hee] The Korea Automobile Manufacturers Association (KAMA) has once again expressed concern over the recurrence of labor-management conflicts in the automotive industry amid the crisis caused by the novel coronavirus disease (COVID-19).

On the 1st, KAMA stated in a press release, "The global resurgence of COVID-19 has increased market uncertainty, and the liquidity crisis of parts suppliers has not been resolved at all. In this situation, the initiation of partial strikes is very regrettable." Korea GM declared partial strikes twice, on the 30th of last month and the 2nd of this month, with each shift (first and second) striking for 4 hours. It is estimated that production disruptions due to labor disputes such as overtime refusal have reached a total of 6,700 units so far.

KAMA said, "Until now, the automotive industry has responded well to the COVID-19 crisis through the government's scientific quarantine efforts and industry cooperation, but the future is problematic," adding, "In particular, the recent recurrence of labor-management conflicts at finished vehicle manufacturers is an issue despite the resurgence of COVID-19 in the US and Europe and the overall crisis in the industrial ecosystem."

According to KAMA, France and Germany announced nationwide lockdowns for four weeks starting on the 28th of last month due to the resurgence of COVID-19. The US is also expanding regional lockdowns, raising concerns about a renewed contraction in demand in key automotive markets.

In particular, KAMA emphasized, "The partial strike by the Korea GM union is even more problematic because it occurred while Korea GM is pursuing a business normalization plan to overcome accumulated deficits, and suppliers are applying the government's special financial program to overcome liquidity crises." KAMA added, "Korea GM is attempting to turn a profit following six consecutive years of losses under the business normalization plan, but entering a partial strike could lead to a vicious cycle of accumulating deficits again. Moreover, with export orders for SUVs centered on the US expanding, production disruptions caused by the partial strike could dash hopes for turning a profit."

Furthermore, KAMA expressed concern that the liquidity crisis of Korea GM's suppliers, who rely on the Korea Technology Finance Corporation's win-win agreement guarantee program, could spread again.

Jung Man-ki, Chairman of KAMA, said, "As COVID-19 continues and concerns about its resurgence increase, cooperation among shareholders, workers, and management is more important than ever," adding, "At this point, concessions and cooperation aimed at maximizing overall profits through medium- to long-term corporate survival are urgently needed rather than short-term profit maximization driven by subgroup selfishness within groups."