Union set to vote on GM Korea deal

GM KOREA’S future hinges on a union vote on a last-gasp wage package thrashed out by negotiators over the weekend after General Motors deferred a board decision to place the operation into bankruptcy.

The breakthrough came after GM Korea executives extended the deadline for an agreement until 5pm Monday at the request of the South Korean government so talks brokered by government officials could continue.

Although details of the deal have not been disclosed, Korean reports say it includes a freeze on wage rises until GM Korea returns to profitability, dropping bonuses and cutting benefits. Any future wage rises will not exceed inflation.

In return, GM allegedly has promised to shift some of the 680 remaining workers at its Gunsan plant – due to close next month – to its remaining three factories, and to commit to building two new SUV models there.

The package will be put to workers on Thursday, and assuming it gets the thumbs up, negotiations will then begin with the South Korean government and Korean Development Bank on a support package requested by GM.

GM Korea chief executive Kaher Kazem said in a statement released in Korean: “Through the latest agreement, GM Korea will be a competitive manufacturing company.”

The decision has repercussions for Holden which imports a number of Korean-built models, including the Astra sedan, Barina, Trax, Captiva and – until this week – the Spark.

Holden has dropped the Spark due to falling sales in the Australia micro car market, although production of the car is set to continue in Korea in the short term, provided plants stay open.

But because GM Korea’s future appears to revolve around two unnamed SUV models, the future of passenger cars such as the Spark, Barina and Astra sedan all appear to be in doubt, at least from the Korean plants.

The Astra sedan – Chevrolet Cruze in other markets – could be next to follow the Spark out of the Holden line-up, as it is built at the Gunsan factory that, regardless of current negotiations, is set to close with the loss of more than 2000 jobs in May. The Astra hatchback and wagon are not affected, as they are made in Europe.

Longer term, the Barina also appears to be under a cloud, as US reports suggest its American-built counterpart, the Sonic, is set to be dropped.

The government has already offered 500 billion won ($A618m) in aid to GM Korea, dependent on a union agreement. The company is also seeking tax incentives.

The Korean Development Bank is a 17 per cent shareholder in GM Korea. GM holds 77 per cent and GM’s Chinese partner, SAIC Motor, holds the remaining 6.0 per cent.

Although GM Korea has the capacity to build more than a million vehicles a year, production has fallen to about half that, plunging the operation into the red over the past four years.

The company’s plight was not helped by the decision to axe the Chevrolet brand in Europe – a major customer for GM Korea-built cars – and falling sales of Holden cars over the past few years.