GM warns of bankruptcy for South Korean unit

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.

Union concessions and govt support needed if automaker is to stay in country, it says

SEOUL • General Motors (GM) said its loss-making South Korean operations would file for bankruptcy if its union did not agree to cut labour costs by April 20, heaping pressure on workers and the South Korean government to swiftly agree on a rescue plan.

The American automaker announced last month that it would shut down one of its four factories in South Korea, and asked for government support and union concessions to stay in the country.

Mr Barry Engle, president of GM International, also told the union leader of GM Korea on Monday that the unit needed to secure US$600 million (S$785 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 confirmed turnaround plan to the government by April 20. If it failed to present a plan by then, it would have no choice but to file for bankruptcy.

The union document added that Mr Engle said the government should also promise to provide support for GM Korea by April 20.

The crisis at GM Korea has created challenges for the administration of President Moon Jae In, who came to power last year promising to prioritise job creation.

A government official, speaking on condition of anonymity, told Reuters that GM appeared to be "using threats to ramp up pressure on the union to make concessions".

Almost 2,500 workers at GM Korea, some 15 per cent of its staff, have applied for a redundancy package that the automaker is offering as part of a drastic restructuring, union officials said previously.

According to the union, Mr Engle said GM Korea may consider more voluntary redundancies for the remaining 680 workers at the Gunsan factory, which will face a shutdown by May.

The union said earlier this month that it will not demand a pay rise and bonuses this year, but instead wants the automaker to provide a future production plan and job security.

GM Korea still wants the union to agree to cut benefits worth 80 to 90 billion won (S$97 million to S$110 million), a union official said yesterday. The automaker has already achieved cost cuts of over 500 billion won through union concessions on wages and bonuses and voluntary redundancies.

GM Korea plans to slash 5,000 jobs but keep production steady if Seoul agrees to its US$2.8 billion restructuring proposal, according to the document seen by Reuters.

GM Korea has said that without new funding from its major shareholders, it would face a first-quarter "cash crisis".

GM headquarters in Detroit has lent its South Korean unit some US$2.7 billion, which it can swap into equity if it gets government support and union concessions.

It also agreed to grant temporary relief in repaying 700 billion won in debt due at the end of last month, with more debts due in the coming months.

REUTERS

A version of this article appeared in the print edition of The Straits Times on March 28, 2018, with the headline 'GM warns of bankruptcy for South Korean unit'. Print Edition | Subscribe