SEOUL, GM Korea Co.'s decision to build a separate R and D corporation will strengthen General Motors Co.'s long-term ties with South Korea, GM Chief Executive Mary Barra said Monday.
The GM Korea union recently sent a letter to the GM CEO demanding a meeting to clear up speculation around GM's commitment to South Korea. GM Korea plans to demerge its engineering and research divisions into a separate R and D company next month. But the union opposes the plan as it sees it as GM's initial step to scale down its manufacturing facilities in Korea.
In a reply, Barra said, "A dedicated engineering services company will benefit from focused management, increased transparency on costs and improved operational efficiency that will make it more attractive for GM to allocate future engineering work to Korea."
The demerger is an important step to allow both the engineering services company and the manufacturing unit to stand on their own as profitable and viable businesses, she said.
The CEO expressed her willingness to visit Korea "at some point soon" for meetings with the union leaders and other key stakeholders.
The Korea Development Bank (KDB), the second-biggest shareholder in GM Korea with a 17 percent stake after GM's 77 percent, also is opposed to the R and D entity plan.
The plan was not covered in the agreement between GM and the KDB that was signed in May to put the loss-making GM Korea back on track. The Detroit carmaker mentioned the R and D firm issue back then, but no consultations have taken place, the KDB said.
In May, GM and the KDB signed an agreement to permit a combined 7.7 trillion-won (US$6.7 billion) lifeline -- 6.9 trillion won from GM and 810 billion won from the KDB -- to keep the money-losing Korean unit afloat.
"Under the agreement, GM and the KDB both commit to ongoing investment in and ownership of GM Korea. These actions should make it clear that our hope and intent is to stay for the long term," Barra said in the letter to the union.
In the same month, GM shut down one of its four car assembly plants in Korea due to a low utilization rate of 20 percent.
GM Korea has suffered weakening sales. Its sales fell 15 percent to 341,349 vehicles in the January-September period from 401,980 a year earlier.
In the 2014-2017 period, GM Korea posted 3.134 trillion won in accumulated net losses due to a lack of new models and weaker demand.
Source: Yonhap News Agency