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SEOUL (Reuters) – General Motors Co will propose a base wage freeze and no bonuses this year as well a suspension of some worker benefits at its money-losing South Korean unit, in an effort to cut costs, showed an internal letter seen by Reuters on Friday.
GM announced last week it would shut a plant in the city of Gunsan, southwest South Korea, by May and decide the future of its remaining three plants in the country within weeks.
“It is impossible to pay 2018 bonuses/one-time payments in 2018,” GM said in the letter sent to team leaders laying out its proposal for this year’s wage talks with its South Korean union.
GM Korea has paid about 10 million won ($9,285.83) in bonuses to each worker almost every year, company officials have said.
To “improve the manufacturing competitiveness of GM Korea,” GM will propose freezing base wages this year and limit future wage increases below inflation, the letter showed.
The proposal includes suspending benefits including school tuition for employees’ children and gold medals and travel expenses for long-serving workers, while removing complementary lunches and other benefits.
A GM Korea spokesman declined to comment, while a union spokeswoman said it has not officially received the proposal.
GM executives have complained that South Korea’s relatively high wages and unyielding unions have contributed to its problems in the country.
South Korea was once a major export base for GM, but saw slumping sales in recent years as GM scrapped its Chevy brand in Europe.
Meanwhile, GM Korea held a board meeting on Friday morning to discuss a plan to ask GM headquarters to extend the maturity date for some of the debt owned by the unit, an official at stakeholder Korea Development Bank said.
GM Korea also discussed holding an extraordinary shareholders’ meeting, the person said, declining to be identified as the matter was confidential.
Yonhap News Agency said the board is also likely to review the U.S. parent’s request to use a factory in Bupyeong as collateral for the debt, which would be subject to shareholder approval.
If put to a vote, state-run Korea Development Bank, which owns 17 percent of GM Korea, would likely oppose the request, to protect assets in the event of GM’s exit from South Korea, another KDB official said on condition of anonymity.
GM Korea has been seeking concessions from the labor union and government support to engineer a turnaround.
South Korea on Thursday said it plans to quickly conduct due diligence on GM Korea and discuss whether or not to extend support to the unit.
Reporting by Hyunjoo Jin; Additional reporting by Ju-min Park; Editing by Christopher Cushing