Fate of GM Korea hangs in balance despite new deadline

Despite the new deadline set to give the labor and the management of GM Korea a second chance to restart, the fate of the nation‘s third-largest carmaker was still in the dark Sunday as the two failed to narrow differences.

The two parties had failed to narrow down differences in job security of 680 workers remaining at the Gunsan plant during the previous wage talks last Friday, the initial deadline. The company‘s board of directors are expected to vote on court receivership on the new deadline of Monday 5 p.m., but no significant progress was made as of Sunday afternoon.

GM Korea said if the union agrees to cut down on welfare benefits worth 100 billion won ($94 million), it would consider offering various options for remaining workers such as additional voluntary resignation, relocation to other factories, and a four year-long unpaid leave of absence.

The union, on the other hand, is urging GM Korea and the US headquarters to finalize job security and new model allocation before anything else.

Amid continued polarity between the two, the going concern value of GM Korea showed to be greater than liquidating value, according to an interim due diligence report on the local unit.

It added, the company could turn a profit from 2020 on GM Korea‘s business normalization plan.

This is under the premise GM Korea and the union agree to self-rescue restructuring plans, and the US headquarters commits to the support plans it had promised.

GM Korea had posted a 3 trillion won deficit for the past three years largely due to sluggish sales, high research and development expenses and a complete knock down on products assembled at Gunsan sold to overseas affiliates at close to production cost.

Samil PricewaterhouseCooper is looking into the mentioned source of debates with results expected to come out at the beginning of next month.

“Wage settlements is a prerequisite for government support. Efforts made by related parties must not become useless due to receivership,” said Lee Dong-gull, head of state-run Korea Development Bank.

The KDB is GM Korea’s second-largest shareholder with a 17.02 percent stake.

Lee’s latest comment calling the union to come on board was made in a meeting with GM Executive Vice President Barry Engle, GM Korea CEO Kaher Kazem, and Rep. Hong Young-pyo of the ruling Democratic Party at GM Korea’s Bupyeong factory in Incheon on Saturday.

The union had refused to join the meeting.

According to recovery plans, the US headquarters would convert GM Korea’s roughly 3 trillion won loan to equity, invest some $2.8 billion, and allocate two new models for production here.

The KDB, meanwhile, would invest 500 billion won in the local unit if the headquarters approves of selective capital reduction instead of a debt-equity swap to retain the value of its shares. 

By Kim Bo-gyung (lisakim425@heraldcorp.com)