GM Korea and its trade unions have reached a preliminary agreement to keep the South Korean automaker alive, agreeing on significant concessions during last-ditch negotiations.
The Yonhap news agency says the union has agreed to key demands from GM, including a wage freeze, reduced benefits, and a stop to bonuses for this financial year.
The union has also agreed to capping future base wage increases to inflation, and tying both base wage increases and performance payouts to GM Korea's ability to post a profit.
In exchange, GM Korea has agreed to offer voluntary redundancy and transfers to other plants for the 680 remaining workers at the Gunsan factory ahead of its May closure.
Above: Boryeong factory.
The agreement will need to be ratified by union members later this week. If the motion passes, the state-run Korea Development Bank (KDB) will inject around 500 billion won ($610 million) into the automaker.
GM will allocate two new models (an SUV and a crossover) for production to GM Korea, and convert the company's US$2.7 billion ($3.5 billion) debt into equity.
"Ratification of the tentative agreement is critical to our viability plan and securing support of the Korean government and our shareholders, the Korea Development Bank and GM," Kaher Kazem, CEO of GM Korea, said in a statement.
“The labour union made huge concessions to save the company,” Hong Young-pyo, the chief mediator between GM and its unions, and a member of parliament from the ruling party, said at a news conference attended by Reuters.
In 2001 GM rescued Daewoo Motors, buying 77 per cent of the company. The KDB secured 17 per cent of the ailing automaker, with SAIC, GM’s partner in China, taking the remainder (6 per cent).
Earlier this month Dan Ammann threatened to seek bankruptcy protection for its South Korean unit by Friday April 20 if a general consensus wasn't reached. The deadline was pushed back as last minute negotiations progressed.
GM Korea has lost money for the last four years, notching up loses of around $2.8 billion in that time.