General Motors Co. (
) is in troubled waters after workers in its South Korea plant
announced a strike related to salary and production volume issues.
The company is already facing declining earnings in South Korea due
to a stronger won.
General Motors workers are paid in accordance to a wage scheme
designed in 1953. However, workers are demanding a $110 rise in
their monthly salary along with the plea for a one-time bonus. The
bonus is decided according to the Supreme Court rule of fixed bonus
issued last year. However, workers insist on a new contract with
several statutory benefits including overtime allowances and
severance pay, in proportion to base wages.
South Korea is one of the largest manufacturing bases of General
Motors in Asia. The automaker produces nearly all Chevrolet
vehicles in the country and exports them to Europe. General Motors
Korea operates through four manufacturing plants in the country and
an assembly plant in Vietnam. However, General Motors plans to stop
selling the Chevrolet brand in Europe by the end of 2015. As a
result, the Korean workers are also demanding for increased
production in apprehension of retrenchment going forward.
General Motors' South Korea CEO Sergio Rocha had warned the
employees of dire consequences if they go on strike. He feared
reduced production as well as job security of the workers. However,
69% of workers, totaling about 14,016, voted for the strike for the
fourth consecutive year. Strikes in Korea are a common phenomenon
and happen almost every year. However, the strike may continue
longer than usual this year.
General Motors, along with automakers like Hyundai Motor Co, is
facing problems with the current wage system. Notably, a revision
in the wage structure will lead to higher labor costs for the
automakers. The workers of Renault SA's South Korean unit also
announced a strike concerning wages last week.
Earlier this week, General Motors announced a temporary production
halt at its Port Elizabeth assembly plant in South Africa. A strike
by the components suppliers compelled the automaker to undertake
this strategy as a last resort.
Wage negotiations between the National Union of Metal workers of
South Africa (Numsa) and the Steel and Engineering Industries
Federation of Southern Africa (Seifsa) also failed to resolve the
issue. Seifsa offered a 10% hike in payment for the lowest paid
workers. However, Numsa demanded a 12% raise.
General Motors currently holds a Zacks Rank #3 (Hold). Some
better-ranked automobile stocks worth considering are China
Automotive Systems Inc. (
), Wabash National Corp. (
) and BorgWarner Inc. (
). China Automotive and Wabash National sport a Zacks Rank #1
(Strong Buy) while BorgWarner carries a Zacks Rank #2 (Buy).
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