General Motors’ South Korean unit appears to have avoided bankruptcy at the last minute, thanks to a tentative wage deal with unions.
GM Korea said in February that it was considering shutting down one of its four plants in the country, and even outright liquidation, which is what bankruptcy entails in South Korea. The operation has been hemorrhaging money for years—demand is down largely thanks to GM having withdrawn the Chevrolet brand from Europe.
Essentially, GM Korea has a choice between bankruptcy and restructuring. The former means the potential loss of 150,000 jobs. The latter involves around 2,600 job cuts and reductions in benefits, and South Korean unions have provided fierce opposition. Unionized workers trashed the office of the division’s CEO earlier this month, in protest at withheld bonuses.
GM (GM) almost filed for bankruptcy on Friday, but delayed the plans until Monday in order to give union talks a last-ditch attempt. And it seems to have worked. The company said Monday that it has dropped its plan to vote on bankruptcy proceedings, thanks to a tentative deal with the unions.
“Through the latest agreement, GM Korea will be a competitive manufacturing company,” unit CEO Kaher Kazem said in a statement reported by Reuters.
However, AP reports that the union still needs to vote on the measures later this week.
GM will allocate new sport utility models to the South Korean facility to help turn it around, the company said. As for the workers affected by the closure of the Gunsan plant, they will be sent to other plants. Other workers will be encouraged to take voluntary redundancy.
According to the Reuters report, the deal will allow GM Korea to accept an offer of financial support from the government-backed Korea Development Bank, a 17% stakeholder in the operation. The government said Friday that it was willing to stump up around $470 million to keep the manufacturer in the country.