Reuters DETROIT (Reuters) — General Motors Co.’s president said on Thursday that April 20 is a hard deadline to reach an agreement on a long-term financial restructuring of GM’s South Korean auto unit, after which the operation would likely seek bankruptcy protection.
“Our preferred path remains to find a successful outcome here,” GM President Dan Ammann told Reuters in an interview. “It’s the right thing for all the stakeholders. But everybody has got to come to the table by next Friday.”
Ammann, who oversees GM’s operations worldwide, reaffirmed what other GM officials told South Korean union leaders in late March.
The April 20 deadline ratchets up pressure on the South Korean government and the state-funded Korea Development Bank, which said on Wednesday they needed until early May to complete due diligence on GM Korea and the automaker’s financial plan before committing public funds.
April 20 is significant because in the following week, GM Korea must make payments to its workers who agreed to leave the company as part of a voluntary severance plan. The unit does not have the cash to make the payments, and GM has so far indicated it will not provide any more cash unless there is a deal with unions and the South Korean government.
If GM Korea sought protection in South Korean bankruptcy courts, it could continue to build cars. However, it is not clear where financing to continue operations would come from. The unit’s creditors and employees also could take financial hits if GM Korea is restructured in court.
GM executives, Korean government officials and labor unions have been in talks since February to hammer out a restructuring and recapitalization of GM Korea, a money-losing operation 77 percent owned by GM, 17 percent owned by South Korea’s state-run development bank and 6 percent owned by GM’s main Chinese partner, SAIC Motor Corp Ltd.
GM in February said it would close one of three assembly plants operated by GM Korea to stanch losses.
GM has offered to invest $2.8 billion in GM Korea, and has sought additional capital from the South Korean government and the Korea Development Bank. The parent automaker has proposed converting into equity a $2.7 billion debt owed to it by GM Korea.
GM has abandoned several money-losing markets over the past three years as part of a broader strategy to boost profit margins and conserve capital to fund electric and automated vehicles and new models for core markets in China, the United States and Latin America. However, quitting Korea would not be an easy call for GM. The Detroit automaker relies on Korean plants to build vehicles for the United States and Latin America, although it could build models such as the Chevrolet Trax elsewhere.
GM also uses GM Korea to prepare what are known as “knock down” kits — partially assembled vehicles that are shipped to other markets for final assembly. GM also has strong relationships with South Korean suppliers that could suffer from a messy exit. Speech