- By Region
The South Korean unit of French automaker Renault is cutting its workforce for the first time due to flagging auto sales domestically and abroad amid the global economic slowdown.
Renault Samsung joins GM Korea in streamlining its workforce as foreign automakers struggle to compete with domestic rivals Hyundai Motor and Kia Motors in Asia’s fourth-largest economy.
Kiyun Park, a spokeswoman for Renault Samsung, said the decision to introduce a voluntary redundancy programme was prompted by “sluggish sales performance”.
“Currently, we are in a difficult situation for cash flow and fixed costs,” she added. The redundancy programme will be open to 4,500 of the company’s 5,500 workers, but not to research and design staff. It will be open to applications until September 7.
It is Renault Samsung’s first voluntary redundancy programme since starting operations in South Korea in 2000. The carmaker has suffered the worst sales performance this year among carmakers in Korea with a 34 per cent slump in sales from January to July.
The sluggish sales have forced the carmaker to reduce production at its sole Busan plant. Carlos Ghosn, Renault-Nissan chief executive, said last month that the next generation of Nissan’s Rogue sport utility vehicle would be built partly in the Busan plant from 2014 to boost its utilisation rate.
Renault Samsung’s exports have been hit hard by the protracted debt crisis in Europe, its major export market. Renault Samsung exports 63 per cent of its cars made in Korea. It is hoping for a sales boost from new models to be introduced over the next year, including an electric vehicle.
Earlier this year, GM Korea also cut about 100 senior managers out of its 17,000 employees through a voluntary retirement programme. A company spokesman said the step was taken to “boost its organisational efficiency.” GM Korea, which exports 83 per cent of its local production, reported a 2.1 per cent fall in sales in the first seven months of this year.
Cooling exports and sluggish domestic demand are taking a toll on the Korean units of the foreign automakers while Hyundai and its affiliate Kia are faring relatively well. Hyundai and Kia, which together control about 80 per cent of the domestic market, have reported sales growth of more than 10 per cent in the first seven months as strong exports offset slowing local sales.
Hyundai and Kia, the world’s fifth-largest automaker by combined sales, have not implemented any major voluntary retirement programmes recently but they are suffering from resurgent industrial action by militant labour unions. Disgruntled workers at the two companies and GM’s Korea unit went on partial strike this week, demanding higher pay and better working conditions.