When General Motors announced expectation-beating first-quarter earnings on Thursday, it added that the company has reached an agreement with labor unions at its struggling GM Korea division, averting a bankruptcy filing that could have come this week.
GM “agreed to provide $3.6 billion in fresh funding to its troubled South Korean unit, higher than its previously proposed $2.3 billion as part of a preliminary deal,” Reuters reported.
“With Korea, we’ve done the major areas we need to address,” GM CEO Mary Barra said on a conference call with analysts after earnings were announced.
“There’s a couple of other countries where we have work to do,” she said. “Not to exit, but to improve profitability. And we’re on it.”
The proposal for GM Korea should soothe what had become a challenging situation for the carmaker, GM Korea’s workers, and the South Korean government. Earlier, GM said that it would close a plant in the country by May and put the money-losing division on notice, setting off speculation that unless GM Korea could develop a turnaround plan, the company would leave the country, as it has done on Russia with its Chevy brand and by selling Opel, its European division.
GM reported a nearly $1 billion charge for GM Korean operations in the first quarter, but CFO Chuck Stevens told analysts that restructuring operations there could result in half a billion dollars in yearly savings.
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