GM Korea averted bankruptcy with last-minute labor concessions from the local auto union, and now, the South Korean government hopes the automaker’s lifeline will position it for success.
But, General Motors and South Korea have very different viewpoints for when GM Korea may return to profitability. Reuters reported on Friday that the U.S. automaker believes GM Korea will return to the black next year. South Korea and state-owned Korean Development Bank think 2022 is the more realistic goal.
The automaker and the KDB signed a $7 billion investment package to bail out the failing entity this week, which gives GM Korea ten years to put itself back on track. Per the agreement, GM cannot exit the investment for those 10 years. After a decade, GM will be free to do what it sees fit. Still, the automaker thinks a $400 million or $500 million profit is possible in 2019.
South Korea’s timeline comes from due diligence the KDB completed to make a final decision on GM Korea. The state-owned entity agreed to provide $750 million for the unit, though still took a cautious tone over its short-term prosperity.
The due diligence report claims labor cost cuts will be the driving factor to push GM Korea back into the black. Last year, GM Korea lost $1.1 billion.