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GM Korea is preparing to file for bankruptcy if the management fails to reach an agreement with the company’s local labor union over a restructuring program that has to be approved within a month.
The Korean unit of the U.S. automaker has been in the red and needs urgent funds to make two upcoming payments.
By the end of April, GM Korea needs US$600 million that will be used to pay subcontractors and to compensate 1,100 workers from a local factory who opted for an offer of voluntary redundancy.
GM earlier said it would shut down the Gunsan factory by the end of May.
Yet, if it fails to reach an agreement with the labor union, it will not compensate the workers that agreed to the redundancy plan. Instead, GM said, it will file for bankruptcy.
That leaves 680 workers who did not agree to this plan and who are now at the center of the dispute with the labor union. The labor union has asked GM to assist these workers before the sides begin discussing wages under the restructuring plan, but the automaker appears to have no separate plan in the works.
By April 20, the automaker has to present to the South Korean government its turnaround plan for its local subsidiary but it wants to reach some sort of agreement with the union before that date.
The turnaround plan, worth US$2.8 billion, was announced in February.
According to a Korean member of parliament who spoke to Bloomberg at the time, the 10-year plan envisaged investments in new models, research and development, facility renovation, and business restructuring. The GM plan came about after the American auto giant initially threatened to leave South Korea altogether amid mounting losses.
Also in February, the head of the GM Korea labor union threatened a full strike if the company fired even a single worker. Now it seems that at least 680 will have to go that way, which doesn’t bode well for the negotiations.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.