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GM Korea threatens bankruptcy unless revival plan gets support
GENERAL Motors Co (GM) said it intends to file its South Korean unit for bankruptcy if its labour union fails to agree on a restructuring plan that needs to be outlined within the next four weeks, putting pressure on employees and the government to help it stay afloat in the country.
Barry Engle, GM's international chief, told union leaders on Monday that the company needs employees' support by the end of this month, a spokesman for GM in Seoul said. April 20 is the deadline for GM to submit its turnaround proposal to the government, and the company is seeking a tentative agreement with unions well before that, the spokesman said.
GM is seeking concessions from the union to revive its South Korean business that's been hurt by mounting losses. In February, GM offered a US$2.8 billion new investment plan to turn around the unit over the next 10 years following a threat to exit the country entirely.
Mr Engle told union leaders that GM Korea faces making US$600 million in payments by the end of April to vendors and employees who applied for voluntary resignations. He said GM won't inject that sum if its plan doesn't get the support from the union, and the company will choose to file for bankruptcy instead.
He also said the company will submit requests for financial support from the South Korean government on Tuesday. Mr Engle also said the company intends to manufacture two models targeted for the US market - one SUV and one crossover vehicle - in its South Korean plants.
As part of its turnaround plan, GM said in February it's closing a facility in the town of Gunsan. The union said it asked Mr Engle on Monday about the company's plan to assist the 680 workers at the Gunsan plant as a precondition for wage negotiations. Mr Engle responded that there was no separate rescue plan for the Gunsan workers since the plant was already being shuttered.
The union has pledged to go on full strike if the company fires even one worker, Lim Han-taek, chief of GM Korea's union, said in an interview in February, also urging the company to include electric vehicle models for its production plans in South Korea that would guarantee a longer stay. BLOOMBERG