General Motors has issued a warning to involved stakeholders of GM Korea: come to agreement by April 20th. Failure to reach an agreement by the deadline will likely cause GM Korea to file for bankruptcy.
The deadline date of April 20th is not a new one. GM first declare that date as the finish line back in February when the company announced the closure of one of its four assembly plants in South Korea. In February that date seemed more feasible than it does now.
In recent weeks tensions have heightened between GM and union leaders in South Korea. Subsequently, the Korean Development Bank (KDB) says it needs until at least May to analyze GM Korea’s proposed restructuring plan.
KDB, a government-backed entity, owns 17 percent of GM Korea today. GM has approached the organization for additional financial support to avoid a bankruptcy filing. GM has committed to investing $2.8 billion into GM Korea, some of which would come from KDB. The company is also seeking a debt-to-equity swap of $2.7 billion to improve its balance sheet.
An initial report from KDB regarding the proposed restructuring is expected this Friday.
While KDB appears to be making progress, union leaders have complicated matters. GM Korea lacks the cash to pay employee bonuses, causing union leaders to enter the office of GM Korea’s CEO and tear up furniture. GM Korea has since had to ban its employees from many of its properties.
GM Korea 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 entity does not have the cash to make the payments, and GM has indicated it will not provide any more cash unless there is a deal with unions and the KDB.
GM President Dan Ammann told Reuters, “Our preferred path remains to find a successful outcome here.”
If GM Korea files for bankruptcy, the company can continue to produce vehicles. It is unclear what the ultimate outcome of the filing would be on GM Korea’s future.