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An awakening swan song

Apr 18,2019
The viability of Busan-based Renault Samsung Motors is in jeopardy due to its protracted labor dispute. Collective bargaining over wage terms for 2019 has dragged onto this year, leading to the longest streak of partial strikes. Nissan, part of the Renault family, has cut orders for the Rogue SUV, which accounts for nearly half of the turnout from the Busan plant, by as much as 40 percent of last year’s volume and instead has taken them to its plant in Kyushu, Japan.

The Busan plant also may lose the 2020 XM3 — the Renault coupe Arkana rebadged for Samsung Motors to target the Korean market — to the Renault base in Spain. With no replacement for popular shipments, the Busan plant that is already running at just 75 percent of its full capacity may not stay open beyond this year.

Partial strikes have taken place nearly 60 times since last October, causing an estimated 240 billion won ($211.5 million) in losses due to production disruption. The management has decided to enforce a five-day shutdown from April 29 to May 3.

Coupled with the poor domestic economy, output in the first quarter shriveled by 40 percent. The woes of the major manufacturing site on the southern coast have spilled over to the supply chain and Busan’s economy.

A former vice president who resigned from office to take responsibility for the prolonged labor dispute left a hand-written letter to employees pleading with them to face the reality that the carmaker was in the hands of a foreign parent.

Like it or not, his swan song is a reminder of the fragility of Korea’s automobile industry. The largest shareholders in GM Korea, Renault Samsung Motors and Ssangyong Motor are all foreign names. Multinational automakers with global networks won’t tolerate high cost and low productivity due to labor disputes in Korea. The country has already lost an assembly site in Gunsan after GM Korea shut down one of its factories here.

The global automobile market is undergoing a major transition. Multinationals like GM have already embarked on restructuring to migrate to the new mobility age of clean fuel, ride sharing and autonomous vehicles. Korea has been the sole member in the top 10 global automakers to lose output for three straight years and last year fell behind Mexico to rank seventh. It cannot afford the luxury of labor disputes. Union members are fretting about their livelihoods as their militant leadership presses on with strikes. They must come to their senses before it is too late.

JoongAng Ilbo, April 17, Page 30