ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronEye IconIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailPositive ArrowIcon PrintSite TitleTitle ChevronIcon Twitter
Companies

GM faces backlash over spinoff of South Korean research unit

Union votes to strike, while shareholder Korea Development Bank plans lawsuit

GM Korea's labor union last week voted to strike if the company spins off its research unit.   © Reuters

SEOUL -- U.S. automaker GM faces a backlash over a shareholder resolution at its South Korean unit that spins off its local research unit. The labor union and minority shareholders are vowing to stop the move, accusing the U.S. automaker of preparing to shut down production lines in South Korea.

GM Korea passed a resolution to spin off its research and development affiliate at a shareholders meeting on Friday. The company said the new entity, GM Technical Center Korea, will focus on automotive engineering and design, while its parent will handle manufacturing and sales.

The decision comes five months after GM Korea signed an agreement with Korea Development Bank, the unit's second-largest shareholder, aimed at turning it around by cutting costs and bringing over production of two new models to South Korea. GM Korea posted a net loss of 1.6 trillion won ($1.4 billion) in 2017, following a 632.5 billion won net loss the previous year, due to falling sales at home and abroad.

KDB was upset by the spinoff plan because the government-owned bank was excluded from the discussions. KDB, which owns 17.02% of GM Korea, said it plans to take legal action to nullify the decision.

"We are preparing," said Jeon Seok-in, a spokesman at KDB, regarding the possibility of a lawsuit against GM Korea. "We asked GM for an explanation [of the spinoff], but were not told about this."

KDB said the motion required the support of at least 85% of the shareholders, but said the company rammed it through, arguing that a 75% vote in favor is sufficient. GM and its affiliates own a 76.96% stake in GM Korea.

The company's labor union voted to strike, with almost 80% of members supporting the walkout last week, if the company spins off the research unit. Union members make up 10,000 out of the GM unit's 13,000 employees.

"With the spinoff, GM is attempting to weaken the labor union and pave the way for withdrawal, restructuring, sale and shutdown later," the union said in a statement. "The spinoff, which ignores the trade union and KDB, is invalid and should be canceled," the statement said.

GM Korea and the union agreed in May to freeze employee salaries this year and to cut benefits to help keep the automaker afloat. Under the agreement, the company canceled its plan to file for bankruptcy protection, but pushed to shut down production lines in Gunsan.

GM Korea is the fourth-largest automaker in the country by domestic sales, behind Hyundai Motor, Kia Motors and Ssangyong Motor. GM Korea's sales in South Korea tumbled 35.3% on the year to 66,322 cars for the first nine months this year, according to data from the Korea Automobile Manufacturers Association.

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Try 1 month for $0.99

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world
.

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends July 31st

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to the Nikkei Asian Review has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media