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Market economy should come first in coping with GM disaster

Market economy should come first in coping with GM disaster

Posted February. 20, 2018 07:40,   

Updated February. 20, 2018 07:40


South Korean President Moon Jae-in said on Monday that GM Korea’s decision to shut down its plant in Gunsan will hurt the region, and called on his government to take all possible measures to boost the region’s economic activity including designating the affected city as an employment disaster zone or a special industrial crisis area. The ruling Democratic Party has created a task force and strongly condemned GM’s decision, saying a GM plant in Korea has fallen a prey to its greedy headquarters who only care about making profits. The opposition Liberty Korea Party said GM Korea’s hardline labor union is to be blamed for the disastrous decision. The conservative Bareun Party urged for not closing down the factory and the Peace Party brought up regionalism after having an interview with GM labor union in Gunsan. Measure are coming out one after another.

The factory in Gunsan employs about 13,000 workers and sub-contract workers. If their families are to be included, the livelihood of about 50,000 people, nearly a fifth of the city’s whole population are at stake due to the decision. The port city has already lost 5,000 jobs since Hyundai Heavy Industries shuttered its Gunsan yard in July last year. A series of large companies’ decisions to shut down their plants in the city wreaked havoc on its economy and employment.

South Korea’s Trade Industry Ministry needs to figure out what is hidden behind GM’s decision and decide whether to provide government help depending on the long-term viability of the plant. A loan of 620 billion won that GM Korea borrowed from its headquarters matures next Wednesday. If the U.S automaker demands for repayment without rescheduling its lending, there is good reason to raise a question whether GM is willing to finance and normalize its affiliate in Korea.

If the Moon Jae-in administration seeks a temporary remedy by trying hard not to upset the voters, political parties, labor unions and GM global, in an attempt to save jobs, this will only lead to another case of failure as GM shut down its production in Australia for good immediately after the Australian government stopped supporting through subsidies. To be sure, we should take stock of the situation and come up with measures. But negotiations with GM should be based upon free market economy. Now is the time to examine the overall competitiveness of South Korea’s automotive industry and prepare comprehensive measures for the country’s auto industry to lead in the future as a core growth engine.