The agreement between GM Korea and the union includes a raise of basic salaries by 4.7% and, more importantly, a $6,140 (6.5 million won) bonus to each worker.
The local division of GM was originally formed out of the remains of Daewoo, and is the American firm’s biggest manufacturer of Chevrolet models outside of North America, exporting more than 80% of its production and accounts for one in every four cars of the brand sold globally.
According to analysts, GM’s move may have a negative effect on the countries competitiveness. Currently, South Korea is the world’s fifth largest car industry just below Germany, with 4.1 million vehicles and a 6% market share in 2010.
The Hyundai Group is also the world’s fifth biggest carmaker reporting record profits last year, largely due to the significant increase of its share in big markets such as the US.
However, according to analyst of Korea Investments Securities Suh Sung-moon, these profits could also prove to be a problem since they are bound to increase workers’ demands to even higher levels than GM’s, making negotiations difficult.
“Rising wage costs in Korea are a big threat undermining automakers’ competitiveness, especially versus Japan, which has traditionally been their benchmark”, told the Financial Times, Ashvin Chotai, managing director of Intelligence Automotive Asia, a consultancy. “In Japan wages have been going down”.