GM may not build new Aveo car in South Korea

Union threatens strike after automaker decides to build car in China, U.S.

SEOUL (Reuters) — General Motors has told its South Korean labour union it has no plans to produce the next-generation Aveo small car at its key Asian base for the time being, prompting the union to threaten strike action.

Sergio Rocha, the head of GM Korea, told the union the automaker had decided to make the new Aveo in China and the United States, and South Korea could produce the model two years after its launch, the union said in a statement.

The decision comes amid contentious wage talks between GM and its South Korean local workforce and feeds fears that the automaker will reduce its presence in the country which makes over four out of 10 Chevrolet vehicles sold globally.

"It was a shocking announcement," the union said, adding that it may strike if fails to reach a deal with the management on wages and future production plans this month.

"Should there is no change in the company's stance, the labour union will be able to launch strike action — our biggest legal weapon."

A GM Korea spokesman said the new Aveo will be produced in China and the United States, but the automaker had not yet decided if the model will be produced in Korea and elsewhere.

Currently, the Aveo sold in China is exported from South Korea as complete knockdown kits for assembly.

GM executives have said that rising wages and tough labour relations make it increasingly unattractive to produce cars in South Korea.

The union argues that the decision runs counter to an earlier pledge from GM to produce cars including its next-generation global mini, small and midsize cars in South Korea.

A union official also said that GM Korea is unlikely to produce the new Aveo two years after the launch, as by then the model will be older and face less demand.

GM Korea also said late last year that it will not produce the next-generation Cruze small car in South Korea, sparking speculation that output of that model may move to Europe to support GM's ailing Opel unit.

Under the annual wage talks that kicked off in late April, the union has demanded that the automaker scrap its plan to cease output of the new Cruze in South Korea. Other demands call for a bonus equivalent to three months' salary and a one-time payment of 6 million Korean won (US$5,300) as well as a basic salary increase of 130,498 won.

GM Korea's union leader Min Ki says employees are working more hours than major overseas counterparts and are being paid less than workers at South Korean automaker Hyundai Motor .

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