In December 2013, South Korea’s Supreme Court ruled that bonuses and other forms of compensation must be included in a worker’s base pay. Now, with higher labor costs looming, General Motors is struggling with profitability concerns.
“The 2014 wage negotiation is going to be the most critical negotiation we’ve ever had with the union,” says CEO of GM Korea, Sergio Rocha, in an interview at the Busan motor show. “I’ll do everything possible and impossible to guarantee that we have a sustainable future. By integrating bonuses and other benefits into the ordinary wage, the labor cost grows substantially. This is not good for GM Korea, this is not good for the industry, and this is not good for Korea Inc.”
Automotive News reports that the Korea Employers Federation has estimated that the court decision will translate into at least $13.5 billion in added annual labor costs for companies. Raising base salaries magnify overall wage costs because they’re used to calculate everything from overtime payments to annual raises, says Rocha.
It’s not only General Motors that is dealing with increased labor costs due to the ruling, as Hyundai Motor Co. and Kia Motors Corp. are battling their unions in court over the issue.
GM Korea exports vehicles (mainly under the Chevrolet banner) to countries such as Australia and Europe.