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GM says sticking to April 20 deadline for GM Korea restructuring

Reuters  |  DETROIT/SEOUL 

By and Hyunjoo Jin

DETROIT/SEOUL (Reuters) - General Motors Co's said common ground must be reached on a long-term financial restructuring of GM's South Korean auto unit by April 20 and if there was none, the operation would likely seek bankruptcy protection.

GM has been in talks since February, seeking support and incentives for the money-losing operation from the as well as concessions on wages from labor unions. The automaker plans to close one plant and is weighing the fate of three others.

The April 20 deadline, first given in late March, ratchets up pressure on the South and the state-funded Development (KDB) which owns a 17 percent stake. The says it needs until early May to complete due diligence on GM and the automaker's financial plan before committing public funds.

"Our preferred path remains to find a successful outcome here," GM told in an interview. "It's the right thing for all the stakeholders. But everybody has got to come to the table by next Friday."

An interim report on the due diligence will come out on April 20, told reporters on Friday, adding that meaningful progress in talks can be made after that.

While there were early signs that GM Korea's union may be more accommodating than in the past, tensions have grown.

Last week, some union members entered the office of GM Korea's and destroyed furniture as the automaker was unable to make planned bonus payments. Talks with the union on Thursday were cancelled after the company demanded security cameras be set up at the site due to safety concerns.

this week also banned employee travel to GM sites until further notice due to worries about security.

GM has offered to invest $2.8 billion in GM Korea, part of which would be shouldered by It is also seeking tax incentives and has proposed converting $2.7 billion debt owed to it by GM into equity.

If GM sought protection in South Korean bankruptcy courts, it could continue to build cars. However, it is not clear where the financing to continue operations would come from. The unit's creditors and employees also could take financial hits if GM is restructured in court.

Complicating matters, GM must make payments to workers who agreed to leave the company as part of a voluntary severance plan in the week beginning April 23. The unit does not have the cash to make the payments, and GM has so far indicated it will not provide any more cash unless there is a deal with unions and the South

Quitting would, however, not be an easy call for GM as it relies on those plants to be a key export hub, building vehicles for the and Latin America, although it could build models such as the Chevrolet elsewhere.

GM also uses GM to prepare what are known as "knock down" kits - partially assembled vehicles that are shipped to other markets for final assembly and it has strong relationships with South Korean suppliers that could suffer from a messy exit.

GM has abandoned several money-losing markets over the past three years as part of a broader strategy to boost profit margins and conserve capital to fund electric and automated vehicles and new models for core markets in China, the U.S. and

(Reporting by in DETROIT and in SEOUL; Editing by Edwina Gibbs)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Fri, April 13 2018. 12:05 IST