General Public, Experts Divided over How to Handle GM Korea | Be Korea-savvy

General Public, Experts Divided over How to Handle GM Korea

(image: Gunsan City Office)

(image: Gunsan City Office)

SEOUL, Feb. 19 (Korea Bizwire)South Korea’s general public and industry experts are divided over how to handle the unfolding crisis at GM Korea Co., which announced plans to close one of its four car assembly lines in the country, observers here said Sunday.

The differing views comes as the South Korean unit of the U.S. auto giant General Motors Co. hinted last week that follow up measures to the closure could be taken if its labor union and South Korean financial institutions do not come forth with support measures soon.

Since the announcement by the carmaker, local social networking services have lit up with various views from ordinary people and experts alike outlining their positions on the matter, which could impact not only thousands of jobs but the country’s automobile industry.

Observers said there are sizable numbers of people on social media objecting to potential public funds going to the automaker, which has taken flak for high labor costs and inefficiency.

On the other hand, many others said closing the company is not an option at this juncture because of the huge fallout in the labor market.

Among those that favor offering assistance, many are calling for conditions to be laid down in advance.

These include firm self-help measures that must be implemented by GM Korea covering new investments as well as compromises by workers.

“Any plan must cover such matters as wage cuts and even layoffs, in addition to efforts by management to get the company back on track,” said Lee Ho-geun, a professor of automotive engineering at Daeduk College in Daejeon. He added that the company needs to outline its plan to turn a profit starting next year.

This view was echoed by Ju Won, a senior researcher at the Hyundai Research Institute, who said policymakers must get a promise that GM Korea will not leave the country for a set period of time if support is given.

“Unless such an agreement is reached, the current situation will just repeat itself,” he argued.

The government, which has said it is examining options, has made clear that it will first examine GM Korea’s self-help plan, investment efforts going forward and how it aims to pull itself out of the present impasse.

The carmaker, which sells its cars under the Chevrolet badge, has been losing money for several years in the face of weak sales at home and abroad. GM Korea said it posted 1.9 trillion won (US$1.8 billion) in net losses for the three years ending in 2016, and last year its estimated net loss reached about 600 billion won.

“The issue must be looked at in the context of its effect on the overall economy and problems facing foreign invested companies,” Minister of Trade, Industry and Energy Paik Un-gyu said last week.

He said, at the time, that because no plans for revival have been submitted by GM Korea, he was not at liberty to say how the government will respond.

The state-run Korea Development Bank (KDB) owns a 17 percent stake in GM Korea, with GM and SAIC Motor Corp Ltd. controlling 77 percent and 6 percent, respectively.

Kim Pil-soo, an automotive engineering professor at Daelim University, said GM Korea is effectively a lost cause at this stage and that there is no point in providing assistance.

“Personally I don’t think the country should extend assistance,” the scholar said.

He said support will, at best, keep the company going for just a little bit longer, until the situation erupts again down the line under the next administration.

A researcher at a private think tank who declined to be identified said that, barring political considerations, it is right that support should be withheld.

“The drop in exports by GM Korea means that it is no longer competitive abroad,” the expert said.

He said that, even for GM as a whole, the company is only doing okay on its home market while struggling abroad.

“This situation is causing the Detroit-based company to reduce its operations overseas,” he said.

Besides the opposing views, most people urged policymakers not to be dragged around by GM.

“GM has a reputation for engaging in tough negotiation, so South Korea needs to be careful,” Lee Hang-koo, a researcher at the Korea Institute for Industrial Economics and Trade, said.

He said GM got considerable concessions from Australia before announcing plans to pull out of that country.

The researcher added that intervention by Washington is something that needs to be considered as well.

He said GM’s latest decision may even be used by the United States in it ongoing trade negotiations.

The U.S. is pushing for renegotiation of the free trade agreement with South Korea, with automobiles being a key part of the talks.

Experts here said that, while there is opposition, the incumbent government has staked its reputation on creating jobs and will probably extend assistance in the end.

“Before a decision is made, the government should get the KDB and the Financial Supervisory Service to carefully check GM Korea’s record books to find any problems,” Kim said.


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