April 20, 2024

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[THE INVESTOR] GM Korea’s union may lose some ground following the release of interim results of a due diligence conducted on the carmaker showing it would be more lucrative to keep it afloat than to opt for liquidation.

The report also said the firm could swing to the black from 2020 under normalizations plans committed by all concerned parties.

Of course, this would be assuming that all concerned parties, including the US headquarters and shareholders like Korea Development Bank, do their part for normalization.

So far, the plans are for the US headquarters to convert GM Korea’s 3 trillion won worth of outstanding loans to equity, invest some $2.8 billion, and allocate two new models for production here. KDB, for its part, would inject some 500 billion won. 

On April 20, an initial agreement deadline came and went when the management and union were were unable to narrow their differences over the job security of some 680 employees at the Gungsan plant. Now, the company’s board of directors are to vote on court receivership by 5 p.m. on April 23.

“Wage settlements are a prerequisite for government support,” said Lee Dong-gul, head of state-run Korea Development Bank -- the second-largest shareholder of GM Korea -- on April 21 at a meeting between the bank, GM vice president Barry Engle, GM Korea CEO Kaher Kazem and Democratic Party Rep. Hong Young-pyo at GM Korea’s Bupyeong factory. The union boycotted this meeting.

GM Korea’s demands are for the union to cut down on welfare benefits worth 100 billion won ($94 million).

In return, it would consider offering various options for remaining Gunsan workers including relocation to other factories, in addition tot he normalization plans.

The union, however, wants a guarantee on job security and new model allocations before anything else.

GM Korea had posted a 3 trillion won deficit for the past three years largely due to a bevy of reasons including sluggish sales and high R&D costs. Further reports on these and other costs are being reviewed by Samil PricewaterhouseCooper, which will announce the results next month.

By Song Seung-hyun and Kim Bo-gyung 
(ssh@heraldcorp.com)  (lisakim425@heraldcorp.com)