GM Korea Dropping Bankruptcy Vote Plan, Saved By Last-minute Wage Deal

  • GM Korea Dropping Bankruptcy Vote Plan, Saved By Last-minute Wage Deal

GM Korea Dropping Bankruptcy Vote Plan, Saved By Last-minute Wage Deal

GM will allocate new sport utility models to the South Korean facility to help turn it around, the company said.

Essentially, GM Korea has a choice between bankruptcy and restructuring.

GM Korea workers also made concessions - they accepted a wage freeze, forgoing bonuses and the suspension of some work benefits.

Korea and its labor union agreed to a last-minute deal to save the company on Monday, with both sides compromising on the automaker's planned factory closure and cuts to employee benefits.

The board of GM Korea delayed a decision to file for court-managed bankruptcy protection until Monday evening, after the automaker failed to reach a wage deal with its labour union in time to meet a Friday deadline.

The KDB has said it could inject about 500 billion won (US$470 million), or 17 percent of the $2.8 billion, into GM Korea if the two sides agree to proceed with restructuring measures and the state lender finds the results of due diligence on the GM unit satisfactory.

Initially, the management offered to transfer 100 workers from its Gunsan plant to the company's other plants in Bupyeong District, Incheon, and Changwon, South Gyeongsang, while putting the rest on four-year leave without pay.

However, AP reports that the union still needs to vote on the measures later this week.

"This will influence further labor conflicts and activities case by case depending on how bad the situations are for companies or how the global economy goes".

Representatives of GM Korea dealerships rally in front of the carmaker's plant in Bupyeong, Incheon on Friday.

The government had stepped up pressure on GM and the union to reach an agreement, saying without a swift deal, some 150,000 jobs at the automaker and its suppliers would be at risk. That help is likely to include tax incentives, along with funds from South Korea's state-run bank, which is the unit's second-largest shareholder.

The KDB, on the other hand, requested a 20-to-1 selective capital reduction to maintain its 17 percent share in the company, since the debt-to-equity swap proposed by GM would bring down the KDB's share in the company from 17 percent to 0.9 percent.

Korea's board of directors were set to vote on court receivership at 8 p.m. should the talks fall apart.

"The government and the KDB will decide on whether to provide various support programs based on long-term business normalization measures GM presents as a responsible major shareholder", Choi told reporters after an event in Yeouido, western Seoul. The operation has been hemorrhaging money for years-demand is down largely thanks to GM having withdrawn the Chevrolet brand from Europe.

General Motors' South Korean unit lost more than $1 billion in 2017 and was in the red for three years before that, too. It is also an engineering and design source for GM's small vehicles and electric vehicles, as well as home to some of GM's top-ranked suppliers globally.