[fn Editorial] Excessive Wage Increase Demands Pushing Automobile Factories Abroad

Rumors of Korea GM's withdrawal are resurfacing. The trigger was Korea GM's announcement to all employees on the 28th about plans to sell its directly managed service centers and some production facilities. The news of Korea GM's asset sale decision comes amid the parent group GM's announcement of new investment plans in the U.S. engine plant, raising suspicions.

If Korea GM withdraws, our automobile industry will inevitably suffer a major blow. Korea GM's main trading partners could face bankruptcy due to falling sales, and even if they don't go bankrupt, the aftermath of layoffs will be unavoidable. However, Korea GM denied that the withdrawal rumors are true.

The business situation is not bad. Last year's consolidated sales amounted to 14.3771 trillion won with a net profit of 2.2077 trillion won.

However, a big problem lies ahead for Korea GM, namely the U.S. tariff policy. With more exports than domestic sales and 84.9% of exports going to the U.S., Korea GM will be directly hit if the U.S. administration's high tariff policy continues.

Despite these circumstances, the union is pressuring the management with excessive wage increase demands. In the wage negotiations that began on the 28th, the Korea GM union is demanding a monthly base salary increase of 141,300 won and a 15% profit bonus from last year's net profit. Considering the impending sales decline, these demands are unreasonable.

Although relatively better off, Hyundai Motor Union's demands are even greater. The base salary increase is the same as Korea GM's at 141,300 won, but they have included a 30% profit bonus from the previous year's net profit and an extension of the retirement age to 64 in the collective agreement.

Hyundai Motor has continued remarkable growth with high quality, but like Korea GM, it will be directly affected by the U.S. tariff barriers. There is a high possibility that performance will decline from the second quarter.

Moreover, the sluggish sales of electric vehicles are also a problem. The operation of Line 2 at Plant 1 in Ulsan, which produces the flagship model Ioniq 5, has been suspended. This line has temporarily shut down for the third time this year. Global sales of the Ioniq 5 fell by 18% last month.

In this situation, Chinese electric vehicle companies are targeting the Korean market with low prices, causing tension in the domestic automobile industry.

U.S. tariffs apply equally to global companies, but the automobile industry is likely to undergo significant changes in the future. In the uncertain reality where it is unknown when the demand for electric vehicles will revive, China's rapid rise is also putting automobile companies in trouble.

Excessive wage increase demands by unions or rigidity in the labor market will hasten the exodus of automobile factories from Korea. Depending on the U.S. tariff policy, Korea GM may withdraw if necessary, and Hyundai Motor may have no choice but to expand and increase production at its U.S. plants, where production costs are lower than ours.