It’s now or never for GM Korea. David Albritton, executive director of product development and international communications for GM, told The Detroit Free Press that the business unit is “simply going to run out of money” and it will have no choice but to file for bankruptcy protection.
GM Korea has been in a downward spiral since February when GM announced it would close the Gunsan manufacturing plant this May. The closure announcement spurred out an aggressive restructuring campaign, and GM hasn’t announced the fate of GM Korea’s other manufacturing facilities.
GM, the South Korean government, the state-owned Korean Development Bank and the auto union must come to a funding agreement to save the floundering business. So far, GM has proposed a $2.8 billion investment and a debt-to-equity swap to potentially save the entity. The KDB and South Korean government have yet to commit to a bailout as it continues to conduct its due diligence. This week, however, the government suggested it could sign a tentative funding agreement in the meantime.
The auto union has been a separate story. The South Korean public has displayed no sympathy for the body and scenes of destruction caused by the union haven’t helped its stature. The union has yet to make any serious concessions in an attempt to restructure GM Korea.
GM Korea has been a recipe for disaster for years. Sales locally dropped sharply in 2017 and were down 12 percent. Exports also continue to decline as GM exits markets that GM Korea once served. Meanwhile, wages continually crept upward and hurt GM Korea’s labor costs significantly.
The deadline for a deal is April 20 and GM continues to stick by the date.
“We’re encouraged with the progress that we’re making, but we’re literally running out of time before GM and GM Korea have to make a decision about the future of the company,” said Albritton.