Workers from subcontractors of GM Korea and citizens call for the early normalization of the ailing carmaker’s operations during a rally in Incheon, west of Seoul, South Korea, April 17, 2018.
(Photo: YONHAP/EPA-EFE/REX/Shutterstock,)
The window for an agreement to save General Motors’ money-losing South Korea unit is nearly closed, according to a GM spokesman.
The spokesman said the automaker is standing by a Friday deadline as it seeks wage concessions and funding from other stakeholders to avoid a potential bankruptcy filing for the unit.
“We’re encouraged with the progress that we’re making, but we’re literally running out of time before GM and GM Korea have to make a decision about the future of the company,” said David Albritton, executive director of product development and international communications for GM. “The entity is really simply going to run out of money. … Without a deal with our key stakeholders, the business would have no option but to file for bankruptcy.”
Bankruptcy would be a major blow for South Korea’s third-largest automaker, which employs almost 16,000 people directly but whose fortunes affect many thousands more workers in the supply chain.
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The fate of GM Korea has been a hot topic since GM announced in February that it planned in May to close its Gunsan plant, which produces the Chevrolet Cruze sedan and Orlando crossover. The plant, which has more than 2,000 workers, has been operating at 20% for three years, according to GM.
Tensions have run high with the union since the announcement, highlighted by media reports of vandalism and a sit-in at the office of a GM Korea official. A message seeking comment was sent to a union spokesman Wednesday.
Albritton said a variety of issues have affected the company’s operations in South Korea, with labor costs rising exponentially and falling production. GM Korea saw its sales decline more than 12% in 2017 compared to the prior year.
GM Korea launched in 2002 when the company acquired the bankrupt Daewoo Motor. GM has proposed a $2.8 billion investment, including two new vehicle programs, over 10 years, if a deal is reached. But in addition to wage concessions, the company wants enough other assistance to help offset an estimated $600 million shortfall, according to Albritton.
GM owns the largest piece of the company, followed by the Korea Development Bank and SAIC, GM’s partner in China. GM is seeking an infusion of cash in the form of a loan from the development bank equivalent to its share and investment from the South Korean government, which could be equivalent to as much as $400 million but could be provided in “any number of ways that governments help companies be successful in their countries,” Albritton said.
“We’d like to see a positive outcome in the situation, but we need all of the stakeholders to come to the table and invest in the future of GM Korea,” Albritton said.
Contact Eric D. Lawrence: elawrence@freepress.com. Follow him on Twitter: @_ericdlawrence.
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