SEOUL (Reuters) - General Motors’ South Korean unit has averted a bankruptcy filing, but analysts and customers, as well as the South Korean government, are debating how long the loss-making company will remain in business.
GM Korea agreed a last-minute wage deal with its union on Monday, paving the way for nearly $500 million in fresh capital injection by the government.
But the government remains unconvinced about the company’s longer-term commitment to remain in business and is pressing GM for a detailed plan. It worries that the U.S. auto giant’s strategy of exiting unprofitable markets may lead to a complete pull out from South Korea.
“Our condition for the support is a long-term viability plan from GM. When we say long-term, we are talking about 10 years and more,” a government official familiar with the GM issue told Reuters.
GM said the plan will help it restructure and eventually halt slumping sales and shrinking factory operations.
“This provides a way for us to turn around the business in the short term and allow us to look at the long-term viability of our business and our product lineup,” GM spokesman David Albritton told Reuters.
But it could be a tall order, as the three remaining out of GM Korea’s four factories are running below full capacity due to GM’s exit from Europe, waning demand for small cars, its mainstay, and consumer concerns about the company’s future in South Korea.
GM has said it will add two new sport utility vehicles in South Korea as part of an $2.8 billion investment over the next 10 years, but production of those new models