Is it possible in Korea to have a car company that pays 40% of the annual salary of workers of existing companies, does not have an annual strike by the union, and sells manufactured vehicles only online? Gwangju Global Motors (GGM), a startup founded in 2019, begins an experiment that will shake the Korean manufacturing industry. If successful, analysts say that it will bring about a new change in the Korean automobile industry, which has been plagued by high wages, habitual strikes, and interference from established unions.
Hyundai Motor Company announced on the 14th that it will start online pre-booking of Casper, the first vehicle produced by GGM. Hyundai Motor is the company’s second-largest shareholder (19% stake) and is in charge of vehicle development and sales. The largest shareholder is the Gwangju Green Car Promotion Agency (21%), which was invested by the city of Gwangju.
GGM held a ceremony to commemorate the production of the first car on the 15th and began full-scale production. Casper, with a displacement of 1000 cc, is a lightweight sports utility vehicle (SUV) equipped with various safety and convenience specifications at a reasonable price (starting from 13.85 million won). Hyundai only sells Casper online. It is the first attempt among domestic automakers.
So far, Hyundai and Kia have not even tried. This is because the sales union of each company staunchly opposed it, saying that their jobs could be lost. Overseas auto brands are continuing to innovate in sales, but there have been concerns that only domestic companies are being held back by the established unions, but it has remained the same.
GGM is also unconventional in terms of wages and labor-management relations. The average starting salary for most workers in their 20s and 30s is set at 35 million won. Last year, Hyundai Motor (88 million won) and Kia (91 million won) produced less than 40% of the average annual salary. An hourly wage system was introduced instead of the salary system.
GGM has no unions. The win-win council, in which labor and management equals participation, takes over. They have decided not to raise their current wages and maintain their welfare level until the cumulative production reaches 350,000 units. A company official said, “It means that there will be no wage and collective bargaining negotiations and no union strike until then.”
In the automobile industry, it is predicted that if GGM succeeds, the game of the Korean automobile industry will change. The reason is that similar manufacturing models can continue to emerge if new companies free from existing ills are established. President Moon Jae-in strengthened his power by participating in Casper advance reservations online on the same day.
In spite of persistent interference, “The Gwangju-type job model fails”
GGM, launched in 2019… Launched the first car on the 15th and started mass production
“The Gwangju-style job model is bound to fail.”
This is a commentary issued by the National Federation of Democratic Trade Unions (KCTU) in October 2018. It was a criticism of the ‘Gwangju-type job project’, which would create new jobs instead of paying only 40% of the wages of workers at existing automobile companies. The KCTU demanded that this project be closed several times after that.
However, consumer interest exploded when Casper, the first product of Gwangju Global Motors (GGM), was unveiled. Since Hyundai Motor opened its exclusive site on the 1st, 700,000 people have visited it until the 13th. On the morning of the 14th, when advance reservations began, the number of visitors exploded and the site was paralyzed. In the industry, with the prospect that the GGM experiment will be successful, there is also an analysis that it can completely shake up the Korean automobile industry.
A finished car factory born after 23 years
The birth of GGM was a ‘continuation of difficulties’. After the first idea came out in 2014, it did not proceed for a while, but in 2018, when Hyundai Motor submitted a letter of intent to invest in Gwangju, the discussion began in earnest. Hyundai Motor’s labor union and the upper-level KCTU obstinately obstructed the project. He even threatened to force a general strike if Hyundai Motor did not withdraw its participation.
In the midst of this, the Korea Federation of Trade Unions (FKTU), which was one of the pillars of discussing this project, made unreasonable demands several times or declared that it would withdraw from the discussion. A person who participated in the business discussion said, “The union of Hyundai Motor Company was worried that if an automobile company with an annual salary of 35 million won was created, their high wages would not be justified. There was a lot of that,” he explained.
After overcoming the crisis of bankruptcy several times, an investment agreement ceremony was held in January 2019, and a corporation was established in September of the same year. The plant was completed in April and trial production began. It is the first domestic automobile production plant in 23 years since the Busan plant of Samsung Motors (now Renault Samsung Motors) in 1998. The primary goal is to produce 16,000 units this year and 70,000 units next year. After that, it plans to build a 200,000-unit system by expanding the plant with an annual capacity of 100,000 units. It plans to increase the number of recruits to 1,000, double the current level (580 people).
Although it is a compact car, it is equipped with intelligent safety technology
The Casper is Hyundai’s first compact sport utility vehicle (SUV). The price starts at 13.85 million won based on the smart trim (detailed model). Although it is cheaper than other vehicles, it has various convenience and safety specifications. A representative example is the application of a ‘full-folding seat’ that completely folds the driver’s seat for the first time in the world. The second row seats can be moved forward and backward up to 160 mm. By sliding the rear seats forward, 301 liters of cargo space can be secured.
It has a gasoline 1.0 engine and can produce up to 76 horsepower. Fuel consumption is 14.3 km/L. If you choose the gasoline 1.0 turbo model, you can produce 100 horsepower. All Casper trims are equipped with intelligent safety technologies such as Forward Collision-Avoidance Assist, Lane Departure Prevention Assist, and Lane Keeping Assist. It is the first among domestic compact cars.
In the industry, analysis showed that because GGM succeeded in reducing unnecessary labor costs, it was able to catch ‘two rabbits’ of reasonable price and excellent performance. An official said, “Since compact cars were not so popular in Korea, there were many concerns about Casper. evaluated.
Will the GGM experiment succeed?
In the automobile industry, it is predicted that if Casper successfully settles into the market, the Korean automobile industry will be turned upside down. The reason is that the attempt to pay a wage (annual salary of 35 million won), which is 40% of that of existing automakers such as Hyundai Motor and Kia, will have a significant impact on the Korean auto industry, which is suffering from high wages. The same is true of the labor-management agreement not to form a union and not to make major changes to the wage and employee welfare system until the cumulative production of 350,000 vehicles is reached.
The Casper sales method is also the first experiment. None of the domestic automakers have ever sold a vehicle online. Many consumers want to buy a vehicle online, which can cut unnecessary costs, but unions have been a stumbling block. This is because the sales union is opposed to the union on the grounds that their jobs are reduced. An industry official said, “It is highly likely that buying a car online will become a daily routine in the future. If Casper succeeds, other automakers will have no choice but to start selling online.”
Byungwook Do / Ilkyu Kim / Gwangju = Reporter Dongryul Lim dodo@hankyung.com
