An hour just before the vote on Monday night by the board of directors General Motors Korea, a probable bankruptcy of the Korean subsidiary of the US manufacturer, the union of employees of the group has accepted almost all the concessions that demanded management.
And instead of coming together for a dramatic vote, management issued a press release to salute the last minute gesture of its employees and to promise them to gradually revive society. ‘The union has demonstrated its commitment and we will continue to work with other stakeholders to also get their support,’ said Kaher Kazem, GM Korea’s managing director.
100,000 jobs at stake
For weeks, the South Korean government has been struggling to save the company, which directly or indirectly depend on more than 100,000 jobs in the country, trying to emerge an agreement between GM Korea, 77% owned by the American General Motors , its creditors and the workers’ representatives.
This was to avoid a maximum of layoffs while helping the builder to find enough cash to finish the month and start a plan to return to balance.
More than 2 billion euros in losses
Over the past four years, South Korea’s third-largest automaker has reported 3 trillion won (2.3 billion euros) in net losses. Already mistreated by the poor sales of its brands in the Korean market, last year, the subsidiary had to deal with a significant loss of activity related to the acquisition of Opel by PSA. Several models of the German manufacturer, then held by GM, were indeed produced in the factories of its South Korean subsidiary before being shipped to Europe or emerging countries.
To offset this decline in production, GM Korea had to close one of its four factories in the peninsula and organize a voluntary redundancy plan for 2,600 of its 16,000 employees. This operation will require the disbursement of indemnities in addition to the huge debts that the group has contracted with its parent company US and several other GM subsidiaries.
Important sacrifices
It was to convince his creditors and investors to entrust him with additional funds that the builder required significant sacrifices for his employees. In the end, they agreed to a freeze on basic salaries, a cancellation of bonuses and a reduction of certain benefits that could eventually allow the group to become profitable again.
Satisfied with this plan, the government should grant tax exemptions to the company and push its public bank, the Korea Development Bank, which already holds 17% of GM Korea, to inject fresh capital into the builder.