[Reporter's Notebook] GM Korea Union Demands 500% Incentive Despite Withdrawal Rumors

The labor union of GM Korea has put forward an unprecedented wage demand this year. On April 28, the union held a temporary delegates' meeting and finalized its proposal, which includes a monthly base salary increase of 141,300 won, a performance bonus equal to 15% of net profit, and an incentive bonus amounting to 500% of ordinary wages.

The wage increase conditions proposed by the union are at a record-high level. The union argues that, as GM Korea has succeeded in turning a profit for three consecutive years, the resulting benefits should be shared. Of course, it is only natural for the union to demand a share of the profits in line with business performance. However, given the internal and external circumstances surrounding GM Korea, this proposal does not seem well-timed.

The Donald Trump administration in the United States has imposed a 25% tariff on imported finished vehicles starting this month. While there has been talk of some tariff relief for parts, this is ultimately only a temporary measure to buy time, and there is no change in the fundamental intention to establish a U.S.-centric supply chain.

The reason GM Korea has succeeded in posting profits over the past three years is due to increased exports of small sport utility vehicles (SUVs) manufactured in Korea to the United States. Why does GM insist on producing low-margin small SUVs at its Korean plant? It is because of cost competitiveness, including labor costs.

With the U.S. government imposing a 25% tariff on imported finished vehicles, automakers are now focused on how to distribute and reflect this cost in vehicle prices and throughout the production process. If the tariff is fully reflected by raising consumer prices by 25%, the company will immediately lose competitiveness in the market. As a result, manufacturers have no choice but to consider relocating production to secure profitability by reducing manufacturing costs, including labor, logistics, and parts costs, during the intermediate stages. This is the backdrop to the persistent rumors of GM Korea's potential withdrawal.

In this situation, calls to increase labor costs are almost self-defeating for GM Korea. Proposing cost-reduction measures and making every effort to secure new vehicle allocations would be more helpful for GM Korea's sustainability. Therefore, the union should focus its efforts on securing new vehicle allocations. Negotiations are expected to include the allocation of new plug-in hybrid electric vehicles (PHEVs) in consideration of the temporary stagnation in electric vehicle demand (the so-called "EV chasm"), as well as the production of electric vehicles and EV parts, direct production of internal combustion engine models' engines, and the early release of improved versions of the two models currently in production (Trailblazer and Trax Crossover).

GM headquarters has consistently denied rumors of a withdrawal from Korea. However, it seems difficult to completely dispel these "rumors" as the allocation of new vehicles to the Bupyeong and Changwon plants continues to be delayed.

GM Korea's guaranteed survival period is only two years. In 2018, when GM closed its Gunsan plant, GM Korea, GM, and the Ministry of Trade, Industry and Energy signed a tripartite memorandum of understanding (MOU) for mutual cooperation. The validity period of this MOU is ten years. Two years from now, GM Korea's survival will depend on labor-management cooperation.