“The labor union has demonstrated its commitment and we continue to work with our other key stakeholders to gain their support,” said GM Korea CEO Kaher Kazem after the agreement was reached with the labor union.
“Ratification of the tentative agreement is critical to our viability plan and securing support of the Korean government and our shareholders, the Korea Development Bank and GM.”
The union plans to hold a vote on the tentative deal between Wednesday and Thursday.
The last-minute compromise came after 14 rounds of negotiations since the two sides first gathered on Feb. 7.
The GM’s side was represented by GM Executive Vice President Barry Engle and GM Korea CEO Kaher Kazem, while the labor side was headed by chief of GM Korea‘s union Lim Han-taek. With the Seoul government eagerly urging compromise, the latest round was also attended by Vice Minister of Employment and Labor Yi Sung-ki and Rep. Hong Young-pyo of the ruling Democratic Party.
In the tentative deal, the two parties also compromised on freezing wages and scrapping bonuses on top of cutting down on welfare benefits, the company said.
GM Korea’s Bupyeong factory will start producing a sport utility vehicle by the end of 2019, and a crossover utility vehicle would be made at its Changwon factory from 2022, according to the latest deal.
Meanwhile, triggering new tension with the government, GM asked the KDB for confirmation on the 500 billion won ($466 million) recapitalization deal by Friday, and requested designation of the sites of GM Korea’s factories in Bupyeong, Incheon and Changwon, South Gyeongsang Province as foreign investment zones.
The government, meanwhile, has reiterated its stance that funds will be provided once GM presents a long-term, sustainable roadmap to restore operations here, while fulfilling financial measures including selective capital reduction among others.
The KDB, for its part, has pitched a selective capital reduction for GM‘s 3 trillion won debt-equity swap to retain its position as GM Korea’s second-biggest shareholder. Without selective capital reduction, KDB’s current 17.02 percent shares would drop to less than 1 percent, and ultimately lose its veto right.
GM, however, is currently opposed to KDB’s suggestion for selective capital reduction.
Choi Jong-ku, chairman of the Financial Services Commission, welcomed the compromise between GM Korea and the unionized labor, while noting that GM headquarters’ commitment for sustainable business as preconditions for support from the government and KDB.
“The government and the KDB will decide on whether to provide various support programs based on long-term business normalization measures GM presents as a responsible major shareholder,” Choi told reporters after a separate event in Yeouido, western Seoul.
“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 liquation value is a point of interest, but it won‘t be the only aspect considered.”
Due diligence on GM Korea currently underway is looking into factors that have caused the company’s mounting deficits, including high research and development expenses, complete knock down on products assembled at Gunsan sold to overseas affiliates at close to production cost and so on.
The due diligence is scheduled to wrap up by early next month.
By Kim Bo-gyung (firstname.lastname@example.org