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GM Korea chief picks labor issues as key concern for investment

Jan. 28, 2021 - 15:19 By Yonhap
This photo taken on Thursday, and provided by GM Korea shows the company's President and CEO Kaher Kazem delivering a briefing on strengths and challenges for foreign companies doing business in South Korea during an online seminar presided over by the Korea Automobile Manufacturers Association. (GM Korea)
Lack of labor flexibility, continued industrial action and annual wage negotiations remain major challenges to doing business in South Korea and attracting foreign investment, the chief of GM Korea Co. said Thursday.

GM Korea President and Chief Executive Kaher Kazem said there are things to be improved to make multinational companies invest further in Korea.

He mentioned the Korea-US free trade agreement, Korea's stable economy, its manufacturing capability and highly competitive supply base as strengths for wooing foreign direct investment.

"Despite these strengths, there are challenges such as continued disruptive industrial relations, short-term cycle labor negotiations, uncertain labor polices, which drives uncertainty and escalation in cost and hinders investment," he said in an online seminar hosted by the Korea Automobile Manufacturers Association.

Citing a World Economic Forum report published in 2019, Kazem said Korea ranked 13th in terms of overall global competitiveness but ranked 51st in terms of labor market competitiveness and 97th in labor flexibility.

He said stable labor relations, flexibility and supply certainty are key to foreign companies' investment decisions.

GM Korea needs to respond fast to market demands and keep costs competitive as it exports more than 85 percent of the vehicles manufactured at its local plants, Kazem said.

"If we look to our peers, Korea lags in important labor practices and regulatory certainty. The bargaining cycle is one year in Korea when compared with the US at 4 years. The pattern of experiencing consistent industrial action in Korea hinders investment," he said.

Partial strikes cost GM Korea about 25,000 vehicles in lost production in the second half of last year. The company already suffered output losses of 60,000 vehicles in the first half due to the impact of the COVID-19 pandemic.

GM has three Korean plants -- two in Bupyeong and one in Changwon -- whose combined output capacity reaches 630,000 units a year.

The Detroit carmaker owns a 76 percent stake in GM Korea, and the state-run Korea Development Bank and SAIC Motor Corp. hold a 17 percent stake and 6 percent stake, respectively, in the Korean unit.

For the whole of 2020, GM Korea sold 368,453 vehicles, down 12 percent from a year earlier. (Yonhap)