What’s Good for General Motors is Good for Korea
by Brendon Carr
General Motors earlier this week announced a bold plan to invest US$6 billion in its GM-Daewoo Automotive & Technology (GMDAT) unit between 2008 and 2011. This is definitely a coup for the Roh government, which has heretofore been engaged in chasing away as many foreign investors as possible. And it’s a vote of confidence in Korea as a “hub” of something, as GM is upgrading its engineering center to employ 2500 automotive engineers, and will designate Korea as its design and engineering center for small cars.
Daewoo has significant expertise in small cars, with models like the Matiz being an all-star sales performer since its introduction in 1998 (yes, that means it’s time to introduce something new, which Daewoo is doing this year). The Matiz, in fact, is so popular it’s been ripped off right down to the bolt-heads by Chinese automaker Chery.
Why is GM making additional investment in Korea, while the other Korean auto group Hyundai-Kia seems to be racing for the exits? GMDAT has tamed its relationship with the union, while Hyundai’s union still barges into shareholder meetings wielding lead pipes. A poisonous relationship with the union is the surest way to kill a company, and “un-poisoning” the relationship the best way to save the company. GM deserves plaudits for rescuing GMDAT and turning it into an exemplar for Korea’s hub ambition.
GMDAT is a massive enterprise (10,000 workers), but the lessons of its turnaround apply to any foreign-invested business in Korea. Maybe your company doesn’t have a labor union. (You surely don’t want one.) In my experience, the foreign companies who find themselves with a disaffected workforce, and an angry labor union, share one thing in common: They don’t have a functioning Labor-Management Committee.
What’s that, you ask? As it happens, Korean law requires any workplace with 30 or more employees to establish a Labor-Management Committee, which is essentially a panel where management dispatches some representatives, the employees dispatch some representatives, and they sit down together on a regular basis to discuss matters of common concern in a collaborative environment. Do you have one? If not, consider establishing one—it’s the first step to good labor relations.
UPDATE 7/29: The Korea Times has a good piece on this very topic by our friend Mr. Tom Coyner, principal of Soft Landing Korea.
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I have to agree with you that out-of-control unions are a major reason for large Korean companies such as Hyundai Motors expanding overseas. I don’t object to voluntary unions, but I do object to unions with state-supported monopoly power. Companies have to compete. Unions should too, and different unions should have to compete not only with each other but also with workers who believe that market forces will protect them better than union bosses.
Given Korea’s militant and collectivist unions, I’m not surprised that Hyundai chose a few years ago to open a brand new plant in Alabama, a right-to-work state with little sympathy for big unions and their history of communist connections, rather than expand production in Korea. Last I heard, Kia had broken ground on a new plant right across the border in Georgia and Hyundai was planning a second expansion of production for the Alabama plant.
Hopefully, the Korean unions will wise up before manufacturing in Korea completely hollows out, but I’m not optimistic.