GM Korea is facing an increasingly urgent liquidity crisis after it failed to convince labour unions to support its restructuring plan by the end of last month.
In March, GM Korea told unions they needed to back its restructuring plan if urgently needed funding was to be made available by US parent company General Motors. Unions agreed to back a two year wage freeze and slashed bonuses, but only if the company reversed its decision to close the Gunsan plant
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Now the loss making car maker is struggling to pay salaries while huge sums are also due this month to suppliers, for loan repayments to creditors and for early retirement payments to redundant staff. By some estimates, the company needs KRW1 trillion (US$937m) in cash to meet this month’s obligations.
In the three years to the end of 2016, the company posted cumulative losses of almost KRW2 trillion (US$1.85bn) followed by a further loss estimated at KRW900bn (US$843m) in 2017.
In a letter sent to employees on Monday, the automaker said it was committed to paying the salaries of its employees this month. It said the company’s 11,000 or so assembly line workers would get part of their monthly salaries on Tuesday (10th) and the remainder by the end of this week.
The salaries of the company’s 2,500-strong white collar workforce are due on the 25th of the month and the company said it would also make every effort to make these payments.
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By GlobalDataBonuses worth some KRW4.5m (US$4,220) per person, the second of the year in accordance with last year’s pay deal, due on 6 April have yet to be paid.
The company is also under pressure to pay suppliers which could lead to the immediate suspension of production of some models and the permanent transfer of production of others, such as the Trax (aka Mokka X) compact crossover, to China.
State owned creditor Korea Development Bank, which is due to complete due diligence on the company’s finances by the end of April, has been asked to provide further support for the company in the interim period.
