SEOUL, Sept. 16 (Korea Bizwire) — GM Korea Co. is seeking to establish a new entity for global research and development, which the carmaker’s labor union is strongly opposing, claiming it is a move to shut down its assembly lines here, industry sources said Sunday.
According to the sources, the South Korean unit of General Motors Co. is moving to set up a new R&D-focused entity that will be involved in GM’s global SUV lineup development.
The carmaker claims that the split-up of its local design center and expanded operations are essential to lead the parent firm’s car design and new lineup development.
“The new entity should be set up before the end of the year in order to secure more car production at the local plant and permit more speedy management decisions,” said a company representative.
In contrast, GM Korea’s labor union insists that the split-up of GM Korea is aimed at shutting down or selling production lines here moving forward.
The sources said the state-run Korea Development Bank, the second-largest shareholder of GM Korea, has filed an injunction against GM Korea’s move to split up and set up a new R&D entity, saying that GM Korea is pushing ahead with the plan without a detailed explanation.
A court decision is expected to be announced in the coming weeks, the sources said.
In February, GM announced a restructuring plan for GM Korea, including the shutdown of one of its four plants in Asia’s fourth-largest economy.
In May, after wage concessions with GM Korea’s labor union and intense negotiations with the Korean government, GM and the state-run Korea Development Bank agreed to take steps to keep the carmaker afloat.
The rescue package calls for GM to convert US$2.8 billion worth of debt owed by GM Korea into shares and extend fresh loans worth $3.6 billion to the local unit for facility investment.
KDB, the second-largest shareholder of GM Korea, would inject $750 million in cash into GM Korea.
As part of the broad agreement, GM agreed to give the KDB veto power in key management decisions.
Under the deal, GM is banned from selling any of its stake in GM Korea before 2023 and is required to keep its holding in the local unit above 35 percent until 2028.
In exchange for a fresh loan from the KDB, the Detroit carmaker also vowed to allocate two new vehicles to its Korean plants that can ensure steady production going forward.