February 27, 2018 / 12:29 AM / in 8 months

GM Korea sees 'positive signal' as union talks to resume this week

SEOUL (Reuters) - General Motors’ (GM.N) South Korean unit said it plans to resume wage talks with its labor union on Wednesday, earlier than expected, as it tries to cut costs at the loss-making operations and keep its factories open.

FILE PHOTO: A logo of General Motors is pictured at its plant in Silao, in Guanajuato state, Mexico, November 9, 2017. Picture taken November 9, 2017. REUTERS/Edgard Garrido

Wage negotiations were suspended this month after GM said it would shut one of its factories in South Korea and decide the fate of the three remaining plants in the coming weeks - a decision that will depend on the concessions it can wrangle from the unions and the amount of government support it can secure.

The resumption of talks underscores the intensifying pressure on the unit’s labor union to make concessions to prevent GM’s exit from the country, where it employs 16,000 people.

The union, which has been holding protest rallies, had previously asserted that talks were unlikely to resume before mid-March unless its demands were met.

“The union is unlikely to go militant. If they don’t make concessions, this could put other factories at risk,” said Lee Hang-koo, a senior research fellow at Korea Institute for Industrial Economics & Trade.

GM is proposing a base wage freeze and no bonuses this year along with a suspension of some benefits such as tuition for employees’ children and gold medals for long-serving workers.

“We hope to make meaningful progress in future negotiations with our labor union ... We see this as a positive signal,” a GM Korea spokesman said of the resumption of talks.

GM has said its discussions with the union and the government must demonstrate significant progress by the end of February, when GM will make important decisions on its next steps.

Over the past week, the union has come under intense pressure from South Korean conservative media to make wage concessions.

“The conservative media are putting us in corner. We can’t just stand still,” a union official told Reuters. The union, however, plans to continue to hold rallies later on Tuesday and on Wednesday.

GM executives and conservative opposition lawmakers contend South Korea’s relatively high wages and unyielding unions have contributed to the U.S. automaker’s problems in the country.

But the ruling party’s senior vice policy chief, Hong Ihkpyo, lashed back. “The labor union should share the pain, but GM Korea’s latest problems stem from GM’s failed global management,” he said in a radio interview.

GM Korea and its South Korean shareholder Korea Development Bank (KDB) have agreed to appoint a third-party accounting firm to conduct due diligence on GM Korea before a decision on government support is made.

KDB Chairman Lee Dong-geol told a parliamentary committee on Tuesday that the state-run bank would take legal action against GM if any irregularities were found during the process.

Reporting by Hyunjoo Jin; Editing by Stephen Coates and Edwina Gibbs

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