The South Korean unit of General Motors Co. announced on Monday that it has reached a tentative wage agreement with its labor union. The U.S. automaker has laid down a key condition to prevent it filing for bankruptcy for the money-losing operation.
With the agreement, the board of GM Korea has dropped its plan to vote on filing for bankruptcy protection, according to a GM Korean representative.
Back in February, GM has shocked South Korea when the automaker revealed a major restricting plan for the unit. The plan involved closing one of its four plants in the country and voluntary redundancies for 2,600 workers.
The U.S. automaker has pursued wage concessions from the union as well as the government funding and incentives to save its remaining three factories in South Korea.
GM Korea’s board has delayed a decision to file for court-managed bankruptcy protection until late Monday. Since GM failed to reach wage deal with its labor union in time to meet its deadline on Friday.
“Through the latest agreement, GM Korea will be a competitive manufacturing company,” stated Kaher Kazem, GM Korea’s chief executive.
Korea Development Bank to Support GM
The agreement would give way for the Korea Development Bank to offer support and for GM to allocate new models. According to the unit, this would help turnaround GM Korea.
GM Korea is the second-largest shareholder of Korea Development Bank with a 17 percent stake. The U.S. automaker owns the 77 percent of GM Korea. Meanwhile, SAIC Motor Corp. Ltd., the main Chinese partner of GM, controls the remaining 6 percent.
The government, on the other hand, had stepped up the pressure on GM and the union to reach a deal. It said the without an agreement, 150,000 jobs at the automaker and some suppliers would be at risk.
Over the past three years, the U.S. automaker is focusing on profitable markets, mainly in the U.S. and China. GM also focused on new technologies including electric and automated cars.
Meanwhile, the South Korean unit has stumbled by labor costs and hurt by the decision of GM to pull its Chevrolet brand from Europe, which is a key export market.
The unit is still making over 1 million assembled vehicles for the U.S., Europe, and other emerging markets.
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