Getting Any Momentum?
General Motors’ South Korean union has said on March 15 it will not demand a pay rise for this year and a bonus pay for last year. As the union has accepted part of the company’s demands but made other requests including prohibition of layoffs for 10 years, all eyes are on how labor and management negotiations will go.
After internal discussion, GM Korea’s union decided not to demand a salary increase and bonus payments this year on the same day. Previously, the company proposed a base wage freeze and no bonuses this year and a college tuition for employees’ two children only as well as a suspension of some other benefits including free lunch, discounts for car purchases and gold medal for long tenured employees.
Conflict between management and labor could have been growing when the union demands a pay increase at the moment. However, there is still room for negotiation after the union accepted a base wage freeze and no bonuses this year, according to market watchers.
GM Korea said, “We will discuss various issues at the next round of negotiations scheduled on March 19.”
Meanwhile, GM Korea is expected to attract new investment through capital increase by issuing new stocks. When GM Korea’s revival plans are competitive in the long term, the Korea Development Bank (KDB) will participate in recapitalization according to its 17 percent stake.
During a press conference at the headquarters in Yeouido, Seoul, on the 15th, Lee Dong-geol, chairman of the KDB, said, “GM said it will convert all the old money lent to GM Korea into equity and we clearly said we will hold no liability. The KDB can cooperate in GM’s new money according to our stake in the firm. New money can be either an equity or a loan but GM seems to choose an equity.” This is the first time that the fact that GM will swap GM Korea’s debts for equity and make a new investment through capital increase is confirmed.
Lee said, “The share ratio of GM and the KDB in GM Korea is 83 to 17. So, the KDB cannot decide everything. We told GM that there is strong public opposition to support for GM Korea and the GM headquarters is the one who needs to solve the problem.” In regard to GM’s residual values in South Korea, Lee said, “That’s not something that I cannot jump to conclusions. Barry Engle, the president of GM International, said he wants to be a good Korean citizen.” Earlier, Financial Services Commission Chairman Choi Jong-ku also said on the 14th, “We confirmed GM’s commitment to assign two new models to the South Korean affiliate and remain in the South Korean market.”
Some point out that Choi and Lee are too optimistic about the future of GM Korea on GM’s say-so amid growing criticism of GM Korea’s insolvency and they are making improper remarks as messages to outside since they are like the window of negotiation.
Lee said, “The bank reached agreement on a lot of things with President Engle and we are still in talks over an indemnity report that GM promises to cooperate with a due diligence. Engle orally assured that he will assign two new models to GM Korea. He was orally 100 percent sure that he will but we keep seeing words ‘if’ in the document.”