UPDATE 1-GM Korea and union in talks Friday afternoon, seek to ward off bankruptcy
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* GM has said without Friday deal, unit likely to seek bankruptcy
* GM wants wage concessions from labor union, govt funding
* Most thorny issue is job security for 650 workers -union (Adds details on unit’s importance to GM)
SEOUL, April 20 (Reuters) – General Motors’ South Korean unit and its labor union were in a fresh round of wage talks on Friday afternoon, keen to stave off a threat by the U.S. automaker to seek bankruptcy for the loss-making unit.
GM wants wage concessions from the union as well as government funding and incentives to save three factories in the country. One other plant is due to be shut down by May.
The Detroit automaker has said the unit, which employs some 16,000 people, is likely to file for bankruptcy if there was no restructuring agreement by Friday. Marathon talks on Thursday failed to reach an agreement.
A union official said the thorniest issue is job security for 680 workers at the Gunsan factory that is due to be closed by May.
“We don’t want a disaster. We still have to keep in mind the worst situation,” he said, declining to be identified due to the sensitive nature of the talks.
“Today is an important day and we will concentrate our efforts on the negotiations.”
Any deal reached would be subject to a vote by union members.
If they fail to reach a deal, GM Korea plans to hold a board meeting at around 8 p.m. to discuss filing for bankruptcy protection, a source familiar with the matter said, also declining to be identified.
GM Korea is “committed to reach a tentative agreement with the labor union today to support the plan to make the company profitable and viable for the long-term,” said company spokesman Park Hae-ho.
But even if no deal is reached, GM Korea is not expected to immediately file for court receivership, as any plan needs to be put to a vote at a shareholder’s meeting. It will also need approval from 85 percent of its shareholders.
That includes the state-funded Korea Development Bank, which holds a 17 percent stake. The bank told Reuters this week that it may sign a preliminary agreement by April 27 to financially support the business should an interim due-diligence report turn out to be satisfactory on Friday.
Over the past three years GM has sought to focus on profitable markets, mainly the United States and China, and new technologies such as electric and automated vehicles.
Although the South Korean unit has been hobbled by labor costs and hurt by GM’s decision to pull its Chevrolet brand from Europe, a key export market, any decision on whether to pull the plug on will not come easy for GM Chief Executive Mary Barra.
The unit was once the backbone of its Asian strategy and still makes more than 1 million assembled or partially assembled vehicles catering to the U.S., Europe and emerging markets.
It is also a engineering and design source for GM’s small vehicles and electric vehicles as well as home to capable suppliers, which account for a quarter of GM’s best suppliers globally in 2016.
($1= 1,060.8700 won) (Reporting by Hyunjoo Jin; Editing by Edwina Gibbs)
Article Courtesy of CNBC
