Please ensure Javascript is enabled for purposes of website accessibility

Another Union Is Mad at General Motors

By John Rosevear - Apr 9, 2013 at 5:00PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

GM's Korean union howled after CEO Dan Akerson suggested last week that the company might move its operations if Korean tensions continued to rise. Is GM about to have another labor headache on its hands?

It seemed like a completely well-intentioned remark, the kind of thing that any concerned global CEO would say.

But when General Motors (GM 4.00%) CEO Dan Akerson said that GM is making "contingency plans" for its operations in South Korea as tensions in the region rise, he may have opened a big can of worms.

Now, leaders of GM's Korean union are hopping mad, complaining that Akerson is trying to bully them into concessions ahead of annual wage talks.

That could turn out to be another headache for GM in one of the company's most important global outposts.

Korea is big part of GM's global operation
GM doesn't sell all that many cars in South Korea, but it's still the country's largest automaker after local giants Hyundai (HYMTF 3.23%) and Kia, which are corporate cousins. GM's five Korean factories produce almost 1.5 million vehicles a year, most of which are exported to markets around the world – including the United States.

In fact, on a global basis, South Korea produces more than 40% of the new vehicles wearing a Chevrolet badge every year. Many of those Chevys are exported to Europe, where Chevrolet is positioned as an entry-level brand priced below GM's German-based (and mostly Europe-built) Opels.

GM Korea, in other words, is heavily dependent on conditions in faraway markets. As a result, GM wants its Korean operation to be as flexible as possible. But the local union takes a more parochial view – and GM's union leaders in Korea have been fiercely resistant to the auto giant's push to change.

Union: Akerson's comments were a threat
What Akerson said last week was that the company was considering "contingency plans", including the possibility of moving its Korean operations, should tensions with North Korea continue to rise. GM's Korean headquarters is only about 20 miles from the demilitarized zone that separates South Korea from the communist North, and – at least to this Western observer – it seems prudent for Akerson to be concerned about the safety of GM's employees there.

But the union didn't take it that way. A union spokesperson told Reuters that Akerson's remarks were intended "to make the union feel jittery" and characterized them as "a threat". Such remarks are typical for the Korean union, which has taken a bellicose approach to negotiating with GM.

GM executives have said that they would like a much more "collaborative" relationship with the Korean union, more like GM's relationship with the United Auto Workers here in the U.S., where the union acknowledges the realities of the global auto business and works with the company to get the best situation it can for its members.

But that's not how it has gone so far.

The upshot: another headache brewing for GM
GM's labor costs in Korea have risen sharply in recent years, a result of relentless pressure from the union that has included litigation. GM Korea executives have openly questioned whether continued investment in Korea is the right thing for GM – particularly as companies like Hyundai continue to establish more and more new factories outside of Korea.

If GM is to preserve its huge Korean presence as a workable part of the company's global production network, it needs the union to play ball. But if these latest remarks are any indication, union leaders aren't interested in making things any easier for the General.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

General Motors Company Stock Quote
General Motors Company
GM
$37.42 (4.00%) $1.44
Hyundai Motor Company Stock Quote
Hyundai Motor Company
HYMTF
$37.51 (3.23%) $1.18

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
332%
 
S&P 500 Returns
118%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.