hankyoreh

The GM Korea factory in Changwon

With continued rumors of GM Korea’s withdrawal from the country, the automotive industry is in a growing state of uncertainty. In addition to employment anxieties plaguing laborers, auto parts companies and local communities in Bupyeong, Gunsan, and Changwon -- where GM Korea plants are located -- are growing increasingly worried.

The Association of Mayors in the Incheon area, which consists of ten local leaders, have proposed a “Citizens Movement for Purchasing Chevrolet,” while the GM Korea chapter of the Korean Metal Workers’ Union recently established an “employment protection special committee.” All the political parties, regardless of ideology, appear to be busy looking for a solution as well.

In Dec. 2010, the Korea Development Bank and GM signed an “agreement for the long-term growth” of GM Korea. Though the Korea Development Bank said at the time that they “formulated a self-rescue plan [for GM Korea], and we are very happy with the results of the negotiations,” it is now keeping silent. Saying only that “GM is not leaving Korea,” GM has yet to allocate any new vehicles to Korea, and the passive stance it and the Korea Development Bank have adopted are adding to the concern.

Tensions surrounding a possible restructuring have only been heightened with the recent appointment of former GM India president Kaher Kazem to become President and CEO of GM Korea. In India, Kazem was the figure responsible for shutting down the Halol plant and refocusing the Talegon plant on exports. Given this background, there has been speculation that Kazem will shutter one or two plants in Korea as part of a gradual shutdown, rather than looking for an immediate sell-off. This pattern has been observed in GM’s restructurings in Russia, Europe and Australia.

In the automotive industry, all kinds of rumors are running wild. There has been speculation that the Bupyeong plant, which holds symbolic headquarter status, is unlikely to be shut down, as is the Gunsan plant, which has the advantage of having newer facilities and greater proximity to a port. An automotive industry source stated, “With the expiration of the Korea Development Bank’s vetoing privileges, the entire industry is interested in which plants GM will kill or spare.” It appears that the automotive industry is taking GM’s restructuring of the Korean market as a fait accompli.

Those who are especially nervous are directing their gaze to the Korea Development Bank. The vetoing privileges outlined in the 2010 agreement, which allow Korea Development Bank to veto special resolutions proposed at GM Korea general shareholders’ meetings, are due to expire sometime in October. Political and labor groups contend that it is necessary to know “the 17 special resolutions” that the Korea Development Bank can veto in order to come up with an appropriate plan.

In a “GM follow-up management status” report submitted by the Korea Development Bank to lawmaker Ji Sang-wook of the center-right Bareun Party, the bank said that, “When GM requested the collateralization of a Korean plant to alleviate its liquidity crisis at a shareholders’ meeting in 2015, we successfully vetoed the move.” Yet the Korea Development Bank added that they could not reveal what the other special resolutions were due to a “non-disclosure agreement.”

At a forum hosted by Democratic Party of Korea lawmaker Hong Young-pyo, researcher Ahn Jae-won of the Korean Metal Workers' Union Research Institute said, “What is the Korea Development Bank so afraid of that they won’t disclose the agreement?” He added, “Even if it’s a secret between two private companies, it’s right to reveal to truth when it becomes a social issue.” Hong also revealed a statement from the campaign of then-candidate Moon Jae-in during the presidential race last April, which said that the agreement between the Korea Development Bank and GM would “be disclosed to the full extent that the law permits.”

On the other hand, in a message sent to Hong ahead of the forum, GM Korea said that the company is “focusing on improving our financial position in order to secure profitability in the Korean market.” The company denied the rumors of withdrawal, adding that “GM operates in markets in which profitability can be secured and long-term growth opportunities can be strengthened. This includes GM Korea.”

By Choi Ha-yan, staff reporter

Please direct questions or comments to [english@hani.co.kr]