The future of GM Korea looks bleaker than ever. With one week left for GM Korea and the union to reach a deal, some analysts believe it still won’t be enough for a sustainable business.
Bloomberg reported on Thursday that ahead of the April 20 deadline for GM Korea to submit a turnaround plan to the South Korean government, bankruptcy seems more likely. The union must agree to cost cuts and concessions, while GM has proposed a $2.8 billion investment and a $2.7 billion debt-to-equity swap. The KDB, Korean Development Bank, has yet to say if it will inject funds into the failing business, and GM has asked for the government to co-invest alongside it.
Lee Hang-koo, a senior research fellow at state-run Korea Institute for Industrial Economics and Trade, said the moves may not be enough to save GM Korea.
“GM has said that it would be inevitable for them to follow suit of the Australia case if the cost at the Korea business keeps rising,” he said.
GM Korea’s downfall has come as the automaker slowly exited unprofitable markets. The local unit once exported cars to Europe, India and Russia—all markets GM no longer does business in. As exports slowed, union costs rose in part due to incredibly high wages. According to the report, GM Korea has racked up a $1.8 billion loss since 2016.
Now, GM must make a decision in South Korea. Noting GM CEO Mary Barra’s track record, its Korean presence may not be long for this world.