GM Korea’s R&D Separation Plan Okayed amid Union Opposition

SEOUL, Oct. 19 (Korea Bizwire) — Shareholders in GM Korea Co. on Friday approved the company’s plan to establish a separate R&D unit amid opposition from the union, which sees the separate unit as a move to scale down local operations over the long term, the company and the union said Friday.

General Motors Co. (GM), the biggest shareholder with a stake of 77-percent stake in GM Korea, approved the plan in a GM-only shareholders meeting. The state-run Korea Development Bank (KDB), the second-largest shareholder with a 17-percent stake, couldn’t join the meeting due to obstruction by GM Korea’s union, according to GM Korea and the KDB.

Under the initiative, GM Korea will integrate its existing design and engineering divisions into a separate R&D-focused entity to carry out various development work for GM’s best-selling compact SUVs.

“The plan to establish a dedicated engineering unit, GM Korea Technical Center, Ltd. has been approved during the shareholders’ meeting. The company will enter into the work of developing new vehicles after setting up the separate R&D company,” GM Korea said in a text message.

In a letter sent to employees Tuesday, GM Korea President and Chief Executive Kaher Kazem said that the establishment of GM Korea Technical Center will help the carmaker put a bigger focus on local manufacturing, export and domestic sales and continue to position itself as a globally competitive manufacturer of high quality vehicles, powertrains and components.

Early this week, GM Korea’s 10,234-member union voted to go on strike to protest the R&D separation plan, which they see as an initial step to scale down or shut down its car manufacturing facilities in Korea. They expressed concerns that GM will, in the long run, only maintain a research facility in the country.

“We are looking at what steps we could take to stop the R&D plan. Staging strikes is part of possible options,” a union spokesman said over the phone.

The KDB recently filed an injunction against the meeting of stakeholders with a local court, but it was rejected.

“There are no urgent concerns that the KDB will suffer irreparable damage if the shareholders meeting is held. This (KDB) injunction request falls short of explaining the necessity of the request,” the Incheon District Court said in a ruling.

KDB Chairman Lee Dong-gull had warned the state lender will exercise its veto if GM Korea pushes ahead with the R&D company plan at the shareholders’ meeting. But the policy lender couldn’t exercise the veto rights Friday.

In a statement, KDB expressed “deep regret” over GM Korea’s decision to spin off its research unit, saying it will take “all possible legal measures” against the spin-off plan.

In May, GM and the KDB signed an agreement to permit a combined 7.7 trillion-won (US$6.7 billion) lifeline — 6.9 trillion won from GM and 810 billion won from the KDB — to keep the loss-making Korean unit afloat.

In the same month, the Detroit carmaker shut down one of its four car assembly plants in Korea due to a low utilization rate of 20 percent.

Any strikes at GM’s plants in Korea could further weigh on the carmaker’s earnings results this year, industry insiders said. Its sales fell 15 percent to 341,349 vehicles in the January-September period from 401,980 a year earlier.

In the 2014-2017 period, GM Korea posted 3.134 trillion won in accumulated net losses due to a lack of new models and weaker demand.

(Yonhap)