Some 2,500 GM Korea employees signed up for the firm’s voluntary retirement applications as of March 2, but the carmaker is still far from a turnaround.
From the voluntary redundancies applications made so far -- about half came from Gunsan plant, which is to be closed down by May -- the carmaker can expect to save up to 400 billion won ($370 million), according to industry sources on March 4.
Given that its losses averaged an annual 750 billion won over the past four years, GM Korea has to look for ways to cut another 350 billion won.
“With some 2,500 workers who have applied for voluntary redundancy, GM Korea now either has to let go of 1,000 more workers or somehow cut the labor costs of the remaining workers,” said Oh Il-sun, head of the Korea CXO Institute.
According to a report released by Oh on GM Korea, GM could cut its cost-to-sales ratio to 88 percent, and sales management expenses to 9 percent, to ultimately post an operating profit of 330 billion won.
The calculation was made under the assumption that GM Korea’s annual sales total some 11 trillion won, a moderate figure compared to the 12.3 trillion won in 2016.
The cost to sales ratio of vehicles assembled at Gunsan averaged over 90 percent over the last four years, which is about 10 percent higher than the market average.
An annual 200 billion won could be saved by downsizing research and development by 1.5 percentage points, the report added. GM Korea spent 614.1 billion won on research and development in 2016, more than its 521.9 billion won of operating loss, according to the Financial Supervisory Service.
As the second-largest stakeholder of GM Korea with a 17.02 percent share, the state-run Korea Development Bank said it would examine financial records on the controversial cost-sales ratio and R&D costs.
Meanwhile, if wage negotiations go smoothly next week, GM Korea will be able save about 140 billion won in bonuses and 150 billion won in welfare payments to cut a total of 290 billion won.
By Kim Bo-gyung/The Korea Herald (email@example.com