GM, Korean union reach tentative deal on wages, workers
General Motors Co. is still in business in South Korea, reaching a tentative agreement Monday with the labor union and potentially avoiding bankruptcy for its operations there.
The tentative labor agreement — the details of which aren’t yet available — acts as the 2018 collective bargaining agreement. Beyond a previously announced closure of the Gunsan plant at the end of next month that will lead to some 2,000 layoffs company-wide, it’s not clear if GM Korea Co. is asking for a drastic reduction in headcount.
The labor agreement was a pre-condition for negotiations with the Korean Development Bank, which owns a 17 percent stake in the company. These talks are the next step in GM Korea’s efforts to avoid a path to bankruptcy. A spokesman for GM said the Korean business unit will run out of cash by the end of this month if it cannot reach an agreement.
“Ratification of the tentative agreement is critical to our viability plan and securing support of the Korean government and our shareholders, KDB and GM,” GM Korea CEO Kaher Kazem said in a statement Monday. “The labor union has demonstrated its commitment, and we continue to work with our other key stakeholders to gain their support.”
GM Korea is asking the KDB to essentially match the company’s promised $2.8 billion investment in its remaining South Korea plants, part of a plan to switch its output to favor more-popular SUVs and crossovers. Based on its 17 percent ownership of the company, KDB would be asked to invest roughly $476 million in GM Korea.
The automaker is also in talks with the South Korean government as GM looks for ways to make its money-losing Korean business profitable. GM spokesman David Albritton said those negotiations are in early stages, and range from potential cash investments to tax incentives.
Intense negotiations with GM Korea’s labor unions began in February when the automaker said it was preparing to shut the Gunsan plant, one of four GM manufacturing facilities in South Korea. The Gunsan plant builds the Chevrolet Cruze compact car and the Chevrolet Orlando compact SUV. At the time, GM International President Barry Engle said GM’s South Korean operations needed to be “urgently addressed. As we are at a critical juncture of needing to make product allocation decisions.”
Since the shutdown was announced, the Associated Press reports that about 2,600 GM Korea workers — 16 percent of its 16,000 South Korean workers — have agreed to a voluntary severance program that includes 1,100 Gunsan employees. Partially at issue during the ensuing negotiations were the 680 Gunsan workers who did not want to leave GM Korea.
GM’s South Korea operations were founded in 2002 from the assets of Daewoo Motor Co. The company suffered a series of hits beginning in 2013 when GM ended Chevrolet sales in Europe, its Chevrolets typically imported from Korea. This decline accelerated with GM exited Russia and India, and then sold its European operations to PSA Groupe SA of France — all markets partially supplied by GM’s South Korea plants.
GM Korea’s proposed restructuring would transform a manufacturing network established as a hub for small cars into a producer of smaller SUVs and crossovers for foreign markets because the Korean business unit only sells some 130,000 vehicles annually in its home market. That could include GM’s South American and Asian Pacific markets.
“This is a very dynamic process,” Albritton said. “All focus right now is on turning the business around toward profitability.”
The union is expected to ratify its tentative labor agreement with GM Korea by Thursday, at which time negotiations with the Korean Development Bank and the South Korean government can begin in earnest.