GM has been a success story for Korea FDI, however, the success story may have been more of a fairytale.
GM produces around 1/5 of its automobiles in Korea. According to local media sources, management at the company is posed to lower production in Korea because of rising labor costs in Korea that are caused by bonuses being included in “regular wages,” thus, increasing severance obligations, a union that threatens to go on strike nearly every year (last year all full-time employees received based on a threat of strike a bonus of around USD 9,000) and increasing wages year-on-year.
GM has, already, decided to not produce the new Chevy Cruise in Korea. The current model will, still, be produced in Korea. It has been noted by NBC that the development center for the Chevy Cruise has been moved from Korea to a technical center near Detroit. A small SUV produced in Korea and sold throughout Europe, seemingly, will have a similar fate.
What is the answer to this problem?
Sean Hayes may be contacted at: SeanHayes@ipglegal.com.
Sean Hayes is co-chair of the Korea Practice Team at IPG Legal. He is first non-Korean attorney to have worked for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty.
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