General Motors has reportedly said its loss-making South Korean operations will file for bankruptcy if its labour union does not agree to cost cuts by April 20.
Reuters reports that the move adds to pressure on the union and South Korea’s government to agree a rescue plan.
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GM announced last month that it will shutter a plant and also asked for government support and union concessions to maintain other operations in South Korea.
Reuters reported that Barry Engle, the President of GM International, also told the union leader of GM Korea on Monday the unit needed to secure US$600m in operating funds by the end of April.
GM is also said to be pushing for a wage deal to be agreed by the end of this month with a turnaround plan needing to be presented to the government by April 20.
GM Korea faces crucial talks with the South Korean government, creditors including state-owned Korea Development Bank and major shareholders, as management looks to rebuild the company’s bombed-out balance sheet and meet upcoming obligations including debt repayment schedules.
Last month’s announcement that it will shut down (by May) the second-largest of three assembly plants in the country, the Gunsan plant with a capacity of 260,000 vehicles per year, was preceded by months of feverish local speculation on whether the US automaker is preparing to quit the country altogether. GM’s strategy to rein in and halt unprofitable operations has massively depleted export orders for Korean plants.
See also: ANALYSIS – GM Korea’s future in the balance
