In a nerve-wrecking moment, literally at the very last hour, GM signs a preliminary deal with the union. Investment plan of $2.8 billion looks promising now.
On Wednesday, a senior government source with direct knowledge of the matter stated, South Korea and General Motors are deliberating on the size of their investment in the local unit of the U.S. automaker, which previously was $2.8 billion.
On Monday, GM Korea averted near bankruptcy by striking a last-minute wage deal with its labor union. It has been asking the South Korean government to provide financial support for its loss making unit in the country.
A preliminary deal is likely to be signed on Friday.
Previously GM had said it would partly fund a “portion of the $2.8 billion investment”, which will pave the way for 2 new SUVs being built of its plant in South Korea. Its investment, spread over a 10-year period, was conditional to GM-Korea’s winning concessions from the union and getting financial support from the South Korean government.
Previously, Korea Development Bank (KDB), a state-run enterprise, had offered nearly $468.4 million (500 billion won), proportional to its 17% stake in GM Korea, to help fund GM’s investment in the unit.
“GM has expressed its intention to increase the size of new money injection from its previous plan to normalize management, and asked the KDB to expand its funding proportional to its stake,” said the source on the condition on anonymity since the matter was confidential.
The source did not quantify the size of the investment.
On Wednesday, MoneyToday, a South Korean online media, reported that GM said it would expand the investment to more than 4 trillion won, meaning that KDB’s spending would also rise to 700 billion won.
GM and KDB declined to comment.
Furthermore, on Wednesday GM Korea restarted receiving applications for a fresh voluntary redundancy program which targets the remaining 680 workers at the Gunsan factory which faces closure by May.
GM-Korea has previously disclosed it would file for bankruptcy if it fails to gains concessions from the union by its extended deadline of Monday evening.
With just 1 hour remaining before the deadline expires, GM-Korea reached a preliminary deal with the union to freeze base wages, skip bonuses this year and trim benefits, subject to a vote by its members on Wednesday and Thursday.