GM Korea’s Future Facing Deadline

GM Korea’s existence is on the line amid changing buyer habits, decreasing profitability, and despite billions in investments.

GM’s operations in South Korea go back to those of Daewoo, which GM took over in 2002. Since then, GM Korea has been responsible for design and production of small cars sold across the globe. That includes the Chevy Sonic, Spark, and Buick Encore sold in North America.

But as GM has pulled out of India, Russia, and Europe, South Korean operations have suffered. Now, it is in rough enough shape that even $2.8 billion in investment and $2.7 billion in debt for equity swaps might not be enough.

GM International head Barry Engle has plans to meet with South Korean officials in a last-chance effort to save the operation. GM Korea has an April 20th deadline to send a proposal for the turnaround to the government looking for union concessions. After that deadline, GM Korea needs to make severance payments to workers, and it doesn’t have the cash. GM said it will not give any more money to the Korean operation to make those payments unless there is a deal between the unions and the government.

GM Korea is looking for cost-reductions from the unions and tax benefits from the government before making more investments in the country. Tensions are running high, with employees storming the CEO’s offices earlier this month.

[source: Automotive News]

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