Published: Mon, April 23, 2018
Global | By Marsha Munoz

GM, Korean union reach accord on wages, workers

GM, Korean union reach accord on wages, workers

After reaching a tentative deal with its labor union today, GM Korea is no longer making plans to file for bankruptcy.

The automaker had sought wage concessions from the union as well as government funding and incentives to save its remaining three South Korean factories.

It is now up to GM headquarters and the state-run Korea Development Bank (KDB) - the largest and second-largest shareholders in GM Korea - to decide on a cash injection plan to keep the automaker afloat. After talks with the union hit a snag, GM Korea had delayed the bankruptcy decision until today.

Korea workers accepted a wage freeze, no bonuses and the suspension of some work benefits.

The company had originally set the deadline for an agreement from the union at midnight Friday, but it was delayed to 5 p.m. Monday after Finance Minister Kim Dong-yeon urged the two sides to find common ground through "swift but honest dialogue" and to avoid jeopardizing 150,000 local jobs at the carmaker and its subcontractors.

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Adding further pressure on Hyundai, U.S. activist hedge fund Elliott Management said on Monday a restructuring plan proposed by the auto group to end circular shareholding structure was not enough, and recommended it create a holding company and increase dividend, among other things.

The GM Korea union did not immediately respond to requests for comment.

A union spokesman declined to comment, saying union members are expected to vote on the preliminary deal on Wednesday and Thursday. Since GM's acquisition of Daewoo Motor Co.in 2002, South Korea has served as an Asian manufacturing hub for GM, mainly producing small and compact cars.

The KDB expects the due diligence results to come out later this week.

He expressed concerns that the period before the two new cars are allocated to the plants is too long, as the carmaker now has no competitive models in its lineup and, worse still, suffers a tainted image after a decade of speculation that GM could exit from Korea due to weak sales and high costs.

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GM restructured its Thai operations, and ceased production in Indonesia and Australia.

The two parties agreed to work toward resolving that issue by sending them to other plants and encouraging other workers to voluntarily leave GM.

GM Korea says it is facing a $600 million shortfall after years of losses in the country. During part of the negotiations GM banned executives from traveling to GM Korea properties because of concerns about possible union volatility. The KDB said that it would offer an amount proportional to its share if GM accepts its terms.

The shareholders began talks to discuss financial support for the company immediately after the tentative deal was reached.

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