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GM Korea’s moral hazard

Feb 26,2018
Regardless of sluggish sales, GM Korea’s employees have enjoyed all kinds of dreamlike perks: a free gift card for up to 50 liters (13 gallons) of gas, a so-called morale support allowance, year-end party expenses, a welfare benefit worth 300,000 won ($278) during Chuseok and Lunar New Year’s holidays, a subsidy of 800,000 won for kindergarten tuition, full coverage of middle and high school fees and up to 12 semesters of university tuition covered.

The benefits are not just financial. Family members of retired and long-term unionized employees get privilege scores in recruitment, reducing chances for other young people who are struggling to find jobs. Even when industrial sites are idle from reduced work hours and holiday periods, employees are guaranteed 70 percent of their average pay. This is why workers at the Gunsan factory in North Jeolla got their comfortable monthly paychecks even when the plant ran at 20 percent of full capacity.

We cannot find fault with collective bargaining terms settled between a union and management. But GM Korea’s situation is different. The company is laden with over 2 trillion won in losses and faces massive restructuring with one factory already closed. It demands a public bailout in order to sustain its business.

Even with the company’s fate at stake, the union stays carefree. It condemned GM for its decision to shut down the Gunsan factory, while indicating that it will take further action and demand government actions. But it does not show any will to share the cost. Tax funds cannot go into the company when workers are engrossed with their own interests.

Deputy Prime Minister and Finance Minister Kim Dong-yeon said the government will consider aid upon seeing responsible actions from all stakeholders — the shareholders, creditors and the union — on top of a long-term turnaround outline from GM. The union cannot be an exception. Taxpayers will be closely watching to see whether authorities keep to their set of conditions for offering relief.

JoongAng Ilbo, Feb. 24, Page 26