GM May Rely Less on Production in Korea

General Motors Co. is gradually scaling back its operations in South Korea because of combative unions and rising labor costs, according to Reuters, which cites unidentified sources.

The unit currently contributes 20% of GM global output. The company contends that its labor costs in Korea will top $1,130 per vehicle this year almost double the average for GM's international operations, according to an anonymous union official quoted by the news service.

The company also is alarmed by a Korean upper-court decision that it says would boost its labor costs there by as much as 12%, Reuters notes. The court says regularly paid bonuses ($8,800 at GM Korea this year) should count as part of an hourly worker's base pay, from which overtime and pension payments are calculated. The country's supreme court is reviewing that ruling.

Union leaders publicly dismiss as a scare tactic the rumblings that GM might reduce its Korean production. But some tell the news service privately that they fear the company might eventually close one of its plants there.

GM already has said it will move production of the next-generation versions of Opel Mokka small SUV and Chevrolet Cruze compact sedan from Korea to plants in Zaragoza, Spain, and an undisclosed facility, respectively.

The company also has moved lead development responsibility for the Cruze from Korea to the company's technical center in Michigan, according to Reuters.

Observers point out that, if the Reuters report is accurate, GM's shift seems certain to affect its previous vow to invest $7.3 billion in Korea over the next five years and make the next-generation versions of six models there.