Bankruptcy of General Motors’ South Korean operation appears to have been averted at the last minute after the automaker agreed a deal with its labour union.
A delayed decision had been due on Monday evening (23 April) after a Friday night deadline had slipped.
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Reuters said the union had made concessions on pay, bonuses and benefits.
A Yonhap report in the Korea Herald said talks had started at 5am Korean time at the carmaker’s Bupyeong factory in Incheon with the 8pm deadline for the board of directors vote on court receivership clearly on all minds.
The main issue was a deal for the 680 workers at the doomed Gunsan factory who had declined an earlier GM offer to transfer to other factories in the country. GM initially offered four years of leave without pay.
Overnight talks involving GM overseas operations chief Barry Engle, GM Korea CEO Kaher Kazem, union head Lim Han-taek and various politicians agreed to relocating remaining workers to Incheon and Changwon and accepting additional voluntary resignations. The four years of unpaid leave, which the union had said was the same as layoffs, was scrapped.
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By GlobalDataDiscussions will continue about workers who refuse to be relocated or resign voluntarily.
Yonhap said GM had suggested a committee to discuss future developments with the union olus another committee for the second Bupyeong factory to discuss future model allocation which could replace the Chevrolet Malibu.
The union reportedly agreed to such suggestions in principle but demanded additional concessions on welfare benefits.
Choi Jong-ku, chairman of the Financial Services Commission, said compromise between GM Korea and the union plus GM headquarters’ commitment to sustain the business were preconditions for support from the government and the state’s Korea Development Bank.
“The government and the KDB will decide on whether to provide various support programmes based on long term business normalisation measures GM presents as a responsible major shareholder,” he said.
“I am aware that the interim due diligence report will be submitted within a day or two. Whether the on-going value is greater than liquidation value is a point of interest but it won’t be the only aspect considered.”
Yonhap said the government set out three principles for a KRW500bn won (US$467.8m) fund which included: responsible role by major shareholder for normalisation at GM Korea; all interest groups including shareholders, creditors and labour union share the pain; putting together long term, sustainable business normalisation measures.
The report said GM Korea had to pay its workers KRW80bn in wages on Wednesday and severance payments worth KRW500bn to 2,600 people on Friday.
According to an interim due diligence report on GM Korea, the going concern value was more than its liquidation value and it could post profits from 2020 on recovery plans.
See also: GM Korea in bankruptcy – the fall-out for future models
