GM Korea to expand engine output

Expansion does not address underutilised second line

SEOUL (Reuters) — General Motors' South Korean unit plans to expand engine output which will allow for an additional production shift, the unit's union said — a move that may help ease labour tensions a little as the automaker seeks to reduce costs.

GM says its labour costs have risen nearly 50 per cent over the past five years in South Korea, undermining the competitiveness of its Korean operations but union activists in the past have threatened 'a war' if output is shifted from their plants.

South Korea is one of GM's major Asian production hubs, accounting for nearly one-fifth of its global output.

GM will start making engines used in its Equinox sport utility vehicles for export to North America starting next year, the union said. Initial plans call for output of 45,000 engines at one of its lines in Bupyeong next year, with a goal to boost production to 120,000 a year.

"We have won a project to secure jobs of union workers," a union official told Reuters.

A GM Korea spokesman confirmed the production plan for new engines.

The plans, however, do not address the fate of an underutilised second line in Bupyeong which builds Malibu sedans and Captiva SUVs.

GM has previously failed in an attempt to move production of the Malibu to another plant in Bupyeong due to union opposition.

As part of GM Korea's annual wage deal last year, the carmaker agreed to build the next-generation Cruze Chevrolet in South Korea starting in 2017 — helping it avoid strikes that are usually common for the automaker in Korea.

GM has, however, also decided to build the Cruze in Mexico — a move seen by some as undermining its Korean operations although the automaker has denied that it will do so.

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