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GM’s endless winning streak

GM has taken aim at the weakest spot of the Seoul government once again: fear of job losses.
Feb 19,2018
To a nation as well as an enterprise, the memory of a victory can be determinative. General Motors has always won over the Korean government. Never defeated, the Detroit-based automaker was able to decide and act fast on its moves in Korea. On Tuesday, it announced that it was closing down one of the four factories of GM Korea in Gunsan, North Jeolla. It informed the government of its decision just a day before and went ahead with the announcement despite pleas from Seoul. The state-run Korea Development Bank (KDB) is its second largest stakeholder with 17 percent of GM Korea, formerly Daewoo Motor, which was sold to the American carmaker in 2002.

GM’s history in Korea is as old as Korea’s automaking industry. It established Saehan Motor in a joint venture that later became Daewoo Motor when the Korean partner’s stake was sold off to Daewoo Group. Daewoo Motor’s majority stake returned to GM when Daewoo Group went into receivership following the Asian financial crisis in the late 1990s. GM bought the third-largest automaker in a fire sale in 2002. Alan Perriton, who was in charge of M&As and strategic alliance in the Asia-Pacific region, knew the Korean market well. Having been the manager of parts at Saehan, he spoke Korean fluently and understood the country inside and out. He headed the GM team for the buyout of Daewoo Motor.

The result is well-known. GM tantalized Seoul officials for more than a year. It had no reason to rush. Park Sang-bae, then-vice president of KDB, said GM knew Korean affairs as if it was looking through the microscope. GM finally came to the negotiating table after Daewoo Motor, under court management, swung a profit after a stringent restructuring. It took the majority stake in Daewoo Motor for $1.4 billion, sharply axed from the original $5 billion price tag.

GM has taken aim at the weakest spot of the Seoul government once again. If GM pulls out of Korea, over 300,000 jobs at the four factories plus suppliers could be lost. The government can hardly take the risk with local elections coming up in June. Moreover, the liberal government’s top priority in its domestic agenda is jobs and income security.

Barry Engle, GM’s executive vice president and president of GM International, visited Seoul last month and met with the senior presidential secretary for economic affairs, industry minister, KDB chairman, and vice finance minister to demand government aid for GM Korea. He came with a full package — new share issues, loans, tax incentives and restructuring. Paik Un-gyu, minister of trade, industry and energy, observed that GM’s demands came at a “very sensitive time” ahead of the June elections. GM said no one (in the Korean government) gave a responsible answer. The decision to shut down the Gunsan factory was GM’s pressure on Seoul to make a fast decision.

The government held a vice-ministerial meeting immediately after the press release. But the deputy prime minister in charge of the economy should have headed a cabinet meeting. Vice ministers cannot decide anything. A director general of the Industry Ministry was even arrested for exercising influence in appointments in the previous government. Few bureaucrats would want to willingly propose or do anything. GM may have been expecting the government to dilly-dally. The government must not be hoodwinked by GM’s gambit.

To gain the upper hand, it must read GM’s intentions. If necessary, the Blue House must take leadership. Authorities must pore over GM Korea’s accounting books and study the headquarters’ management strategy. It must find out how much it earned in Korea, where Korea’s automaking competitiveness stands, and what impact a militant union would have on the troubled GM Korea and other Korean automobile production lines. After it has done its research, the government can set the Maginot Line on how much it can do to help. Then it should press GM for serious negotiations.

The union’s role is pivotal. The union warned of all-out protests against GM bullying. This too could be what GM wishes. Seoul would lose its balance if the union turns violent. It would also lose public support for a bailout. The union also must be strategic. It must work closely with the government to jointly address the U.S. automaker. If not, the union and government will all lose. We could once again deliver a winning trophy to GM.

JoongAng Ilbo, Feb. 15, Page 26

*The author is a columnist of the JoongAng Ilbo.

Yi Jung-jae