General Motors' Asian unit has reached a tentative agreement with labor union representatives on base pay, bonuses.
GM Korea and labor representatives reached a tentative agreement on Monday that will see concessions on base pay, bonuses, and benefits, pending a ratification vote this week. The agreement is the first step in an attempt to keep open the remaining three factories in the country and turn around the beleaguered automaker after GM announced in February it would close its Gunsan plant and lay off 2,600 workers. The company canceled a scheduled vote on whether to file for bankruptcy for Monday after the agreement was reached.
“Through the latest agreement, GM Korea will be a competitive manufacturing company,” Kaher Kazem, chief executive of GM Korea, said in a statement that was translated by . GM Korea can now focus on securing $500 million in emergency funding from the South Korean government to continue operatiions and pay employees. In a statement, the company said the labor agreement would pave the way for the Korea Development Bank, GM Korea's second-largest shareholder at 17 percent, to provide support. The company also plans to allocate two additional models to South Korean plants to boost production volumes. Without support, some 150,000 jobs are at risk in the Asian country.
Still, a GM Korea turnaround is still not assured. The unit's specialty is in producing small cars for domestic and global markets, but a swing toward SUVs and crossovers has made GM Korea's wares less desirable. An earlier decision by GM to end the Chevrolet brand in Europe also hobbled demand of GM Korea's vehicles. Last year, the unit lost a total of $1.1 billion. A funding agreement between GM Korea and the Korean Development Bank could come as soon as April 27th. Labor unrest boiled over earlier this month, culminating in after it was announced bonuses would be canceled.