GM Korea Co., the South Korean unit of General Motors Co., froze the base wages for 500 executives and team leaders early this year in a drive to cut costs ahead of a local plant shutdown, the company said Wednesday.
As the 500 workforce does not belong to GM Korea's 13,000-member union, the company didn't need to seek an agreement for its actions. The company also asked them to reduce the use of corporate cards, according to GM Korea.
The move came before GM announced on Feb. 13 it would shut one of its four car assembly plants in South Korea by May and decide the future of the remaining plants within the following weeks due to low productivity.
GM Korea said it already began an "expense controllership" on overall expenses involving labor and welfare benefit costs early this year. It also offered a voluntary retirement program to all of its 16,000 employees as part of GM's global business restructuring plan.
In extended efforts to cut costs, GM Korea has recently proposed a base wage freeze and no bonuses this year together with the suspension of some worker benefits, such as school tuition for employees' children and free lunches.
On Friday, GM Korea said it aims to reduce benefits worth at least 310 billion won ($287 million) a year, as it engages in wage talks with union members.
If accepted, it will be a heavy blow to the union workers who have received about 10 million won in bonuses per person almost every year despite the company's poor business performances in recent years.
GM Korea and its union have yet to accept talks on the proposal. They are scheduled to meet at the company's main plant in Bupyeong, just west of Seoul, on Wednesday to discuss wage terms for the year of 2018.
The local carmaker's parent company is in talks with the Seoul government for a breakthrough in turning the US carmaker's loss-making Korean unit around.
The state-run Korea Development Bank, the second-biggest shareholder in GM Korea with a 17 percent stake, is moving to quickly complete due diligence on GM's South Korean operations before it decides on any financial support for the company.
Samil PricewaterhouseCoopers will carry out the due diligence on GM Korea on behalf of the KDB and will aim to finish the process by the end of April, according to the state lender.
The accounting firm will take a closer look into GM Korea's financial statements amid speculation that GM has extended loans at high rates to its South Korean unit, bought Korean-made Chevrolet vehicles at low prices and made GM Korea send a certain amount of R&D money to its parent each year.
After reviewing the due diligence's results, the KDB plans to decide on whether to make an investment in GM Korea and how much taxpayer money can be injected into the company.
GM owns a 77 percent stake in GM Korea and SAIC Motor Corp. controls 6 percent.
In 2017, GM Korea produced 520,000 vehicles at its car assembly plants, which have a combined capacity of 910,000 units. It sold 524,547 vehicles last year, down 12 percent from a year earlier. (Yonhap)