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KDB Decides to Allow GM Korea to Spin off R&D Unit into Separate Firm
Amid Opposition from Labor Union
KDB Decides to Allow GM Korea to Spin off R&D Unit into Separate Firm
  • By Michael Herh
  • December 19, 2018, 10:49
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The labor union of GM Korea is still opposed to the separation of the R&D unit from the company.

The Korea Development Bank (KDB) has decided to allow GM Korea to spin off its R&D unit into a separate company.

Instead of withdrawing an injunction application filed with the court to suspend the separation of the unit from GM Korea, the KDB agreed with GM to designate the new company as an R&D base for sports utility vehicles (SUVs) and crossover utility vehicles (CUVs) and maintain the new R&D company for at least 10 years by taking orders from third countries.

However, the labor union of GM Korea is strongly opposed to the corporate separation policy so there lies a tough road ahead to the normalization of GM Korea.

The KDB made a tentative decision on Dec. 18 to approve GM Korea’s separation of the R&D unit. After reviewing the business plan for the proposed R&D company, the bank recently concluded that the R&D company would have a big positive impact on sharpening GM Korea's competitiveness.

Following the KDB’s change of its mind on the R&D unit issue, GM Korea held a board meeting and a general shareholders meeting to approve its plan to establish the R&D corporation.

GM Korea passed the matter on establishing the new corporation by holding a general shareholders meeting in October. In this process, the labor union of GM Korea precluded the KDB from entering the hall for the general shareholders meeting. The KDB filed an injunction with the court, asking the court to invalidate the results of the general shareholders meeting, starting a legal battle.

Since then, the court ruled to suspend some of the effects of the resolutions made in the shareholders meeting. Since then, GM Korea’s spin-off work had been put on hold.

The KDB explained that the state-run bank would maintain its status as the second largest shareholder of the two corporations even when GM Korea is divided into production and R&D corporations.

The problem is the GM Korea Labor Union’s resistance. This is because the labor union is still opposed to the separation of the R&D unit from GM Korea unlike the KDB and GM which struck a deal under the table. It was reported that the opposition of the labor union put off a meeting of the government-ruling party council scheduled to be held on Dec. 17. "We cannot recognize the unilaterally held general shareholders meeting following talks had behind doors between the KDB and the management of GM Korea and will map out a struggle plan including going on a general strike," the labor union said. However, the separation of a unit from a corporation is a management activity which does not require an agreement from the labor union. So it is not clear whether or not labor union members will go on a strike. In fact, on December 30, the Central Labor Relations Committee made an administrative guidance decision on the second application for a labor dispute settlement filed by the GM Korea Labor Union, disabling the labor union from securing a right to going on a strike.