[Aju News DB ]
SEOUL -- The debt-stricken South Korean unit of General Motors reached agreement with union leaders Monday on a rehabilitation package that would pave the way for a bailout from creditors to avoid court receivership.
The agreement, which came shortly before the deadline set for 5:00 pm (0800 GMT) Monday, will be put to a vote by unionized workers on Wednesday. If approved, GM Korea will be able to start fresh negotiations with creditors and government officials on how to turn around its troubled business.
"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," GM Korea president Kaher Kazem said in a statement.
GM officials have threatened to file for court receivership if negotiations break down. They insisted GM Korea needs some 600 million US dollars by the end of April for debt payment and retirement bonuses.
GM's decision on February 13 to close one plant in Gunsan by the end of May as part of its global business restructuring triggered concerns about layoffs at other plants in South Korea. Out of 2,600 workers in Gunsan, more than 1,900 left. GM Korea would transfer the remaining workers to other factories or allow them to leave through an early retirement program.
GM Korea applied for government approval to designate its factory sites as foreign investment zones to receive corporate tax benefits. Trade Minister Paik Un-gyu said the government would put GM Korea's request on the table only after negotiations with union leaders are successful.
Paik stressed GM should give its outright long-term commitment to doing its business in South Korea such as an investment in new technologies related to next-generation cars that could keep factories running for the next five to 10 years.
GM has suggested it could produce two new models in South Korea, convert 2.7 billion US dollars in debt owed by its Korean operation into equity in exchange for financial support. Korea Development Bank (KDB), a state policy bank which holds a 17 percent stake in GM Korea, has urged the American carmaker to give a firm long-term commitment about its business in South Korea.
GM Korea, the third-largest carmaker in South Korea, has been hit by falling sales as well as rising costs and debt. GM officials have complained about excessive demands and labor activities by unionized workers. In South Korea, GM has run four car assembly plants and one transmission factory since it acquired Daewoo Motor in 2002.
reporter
Lim Chang-won
cwlim34@ajunews.com
