"Not Just Someone Else's Problem for Ssangyong" Internal and External Crises at Korea GM and Renault Samsung

[Asia Economy Reporter Yoo Je-hoon] Amid rising tension in the mid-sized complete car industry following SsangYong Motor's commencement of court receivership, both Korea GM and Renault Samsung Motors have also encountered difficulties. Along with deteriorating performance, labor-management conflicts due to downsizing show little sign of resolution.

According to the automotive industry on the 19th, the Renault Samsung labor union conducted a targeted strike for four hours on the 16th afternoon. This was a warning measure following no significant progress in the 8th main labor-management negotiations held on the 15th.

Unlike previous strikes mainly involving union executives, this targeted strike reportedly included general union members as well. The union stated, "Since the management broke promises and did not present proposals during the main negotiations, we proceeded with a strike involving the members," adding, "Production at the Busan plant was halted for about four hours."

The lack of progress in Renault Samsung's wage and collective bargaining negotiations well past April is partly due to ongoing group-level restructuring. As workplace sales and production cuts lead to changes in work systems, the gap between labor and management is widening.

Earlier, Renault Samsung returned to a deficit after eight years and sold the small maintenance facility, Gyeonggi Ilsan Technostation (TS). It is also considering shutting down the Incheon and Changwon service centers. Recently, it lowered its annual production target by more than 30% and switched to a single-shift system producing 60 units per hour. In February, it also accepted voluntary retirement applications from all employees.

Korea GM is also heightening labor-management tensions by deciding to close the Changwon logistics center following Jeju. Although the number of workers is not large, the union strongly opposes this as part of Korea GM's ongoing downsizing efforts to normalize management.

Both companies have embarked on continuous downsizing because recent performance shows little sign of recovery. According to the Financial Supervisory Service's electronic disclosure system, Korea GM and Renault Samsung recorded operating losses of 316.8 billion KRW and 79.6 billion KRW respectively last year. Korea GM has posted losses for seven consecutive years, while Renault Samsung returned to a deficit after eight years.

To make matters worse, unexpected adverse events have occurred. Due to the global semiconductor supply shortage, Korea GM will suspend operations at Bupyeong 1 and 2 plants for five days from today until the 23rd. Among these, Bupyeong 1 plant produces the Trailblazer, a best-selling model in both domestic and export markets, so the impact is expected to be significant. Particularly burdensome is the recent series of losses the company has suffered in lawsuits filed by in-house subcontracted workers seeking recognition of their employment status (illegal dispatch). If the rulings are finalized, the company will have to hire them as regular employees, resulting in considerable cost burdens.

Renault Samsung faces the immediate problem of a sharp decline in sales. Its cumulative sales in the first quarter were 22,068 units, a 22.3% drop compared to the same period last year. It is the only complete car manufacturer not affected by the semiconductor supply shortage, which is an unfortunate situation. Unlike Korea GM, which plans to produce a new crossover utility vehicle (CUV) in 2023, Renault Samsung has no new car plans at all.