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Fate of GM Daweoo tied to probable bankruptcy to be filed early this week
June 01, 2009
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It is the first, but not the only, currently troubled Korean auto manufacturer. The fate of GM Deewoo is also up in the air. Ssangyong’s move came in response to a strike called after the company announced plans last month to lay off around 36 percent of its workforce. The company, 51 percent owned by China’s Shanghai Automotive Industry Corp., has been under bankruptcy protection since February. By cutting its workforce and offering its main plant in Pyeongtaek as collateral, the company hopes to receive 250 billion won ($199.5 million) in new loans. “It was inevitable,” said Lee Yoo-il, one of two court-appointed managers at Ssangyong. “The company will do its utmost to normalize management through rapid completion of restructuring and stabilizing labor-management relations.” While it has been ordered to submit a turnaround plan by September, the Seoul Central District Court this month said that Ssangyong is worth saving but warned it could still be liquidated if the company does not follow through with job cuts as planned. Meanwhile, the parent company of GM Daewoo Auto and Technology is on the verge of bankruptcy in the United States. General Motors, the ailing American auto giant with the No.1 market share in the U.S., has a June 1 deadline for unveiling restructuring plans. The company’s board of directors met on Saturday to reach a final decision on whether it would file for bankruptcy protection today. It has faced tough negotiations with its bondholders on a debt-for-equity swap. Although GM has yet to confirm whether it will declare bankruptcy, it has scheduled a press conference on Monday morning (local time) in New York. GM Daewoo has asked state-run Korea Development Bank to provide 1 trillion won in financial support, but KDB has been reluctant to do so, citing the dire state of GM. GM Daewoo, owned 51 percent by its mother company and 28 percent by KDB, is a major source of money for GM. Last year, 23 percent of GM cars sold worldwide were manufactured by GM Daewoo. KDB said Friday that it has called for GM to make GM Daewoo its main production base for its hybrid and small-sized cars as a precondition for financial support. On the other hand, GM’s expected bankruptcy filing is seen to be an opportunity in disguise for Korean automakers to broaden their share of the U.S. auto market. “GM and Chrysler’s market share in the U.S. has been plummeting,” said Suh Sung-moon, an analyst at Korea Investment and Securities Co. “Market share growth for Hyundai Motor and Kia Motors in the U.S. however, are No. 1 at the moment. It is likely that the two companies’ market share will go above 10 percent there with the probable GM bankruptcy.” Some caution against over-optimism, however. The Korean Metal Workers’ Union yesterday announced that its members will start a strike on June 10 for two hours a day. The union will ask member labor unions of Hyundai Motor, Kia Motors and GM Daewoo - which have not yet decided on participating in the strike - to finish a vote by June 12. The union, which includes Korea’s four automobile manufacturers as well as numerous domestic parts companies, is requesting a stop in further employee cuts, a 4.9 percent raise in basic pay, a guaranteed 1.07 million won for minimum monthly wage at companies related to metal or parts production and a reduction in working hours. By Cho Jae-eun [jainnie@joongang.co.kr] |
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