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GM says South Korean unit will file for bankruptcy if no union concessions by April 20
[SEOUL] General Motors said its loss-making South Korean operations would file for bankruptcy if its union did not agree to cut labour costs by April 20, the union said on Tuesday.
The US automaker announced in February it would shut down one of its four factories in South Korea, and asked for government support and union concessions to stay in South Korea.
Barry Engle, the President of GM International, told the union leader of GM Korea on Monday the unit needed to secure US$600 million in operating funds by the end of April, the union said in a document reviewed by Reuters.
A GM Korea spokesman said the union concessions were needed for the automaker to present a turnaround plan to the government by April 20, adding GM wants the union to reach a wage deal by the end of March.
If GM Korea failed to present the plan by April 20 it would have no choice but to file for bankruptcy, the spokesman said.
Almost 2,500 workers at GM Korea, equivalent to 15 per cent of its staff, have applied for a redundancy package that the US automaker is offering as part of a drastic restructuring, union officials have said previously.
GM Korea may consider more voluntary redundancies for the remaining 680 workers at the Gunsan factory, Mr Engle said according to the union, adding that layoffs were the last option.
NO PAY RISE THIS YEAR
Mr Engle said the South Korean government should also promise to provide support for GM Korea by April 20, the document said.
Earlier this month, GM Korea's second-largest shareholder, state-funded South Korean Development Bank, began a due-diligence review of GM South Korea to decide whether to inject more capital into the unit. The review is expected to be completed by mid-May.
The union said earlier this month that it will not demand a pay rise and bonuses this year, but instead wants the US automaker to provide a future production plan and job security.
GM Korea still wants the union to agree to cut benefits worth 80-90 billion won (S$96.8-$110 million), a union official said. The automaker had already achieved cost cuts of over 500 billion won through union concessions on wages and bonuses and voluntary redundancies, the union official added.
GM Korea plans to slash 5,000 jobs, or about 30 per cent of its workforce, but keep production steady if Seoul agrees to its US$2.8 billion proposal for the loss-making operation, according to a document seen by Reuters earlier this month.
GM Korea, which employs nearly 16,000 people, has said that without new funding from its major shareholders it would have a first-quarter "cash crisis".
GM owns 77 per cent of its South Korean unit GM Korea, while KDB owns a 17 per cent stake. GM's main Chinese partner, SAIC Motor Corp Ltd, controls the remaining 6 per cent.