GM’s R&D spinoff plan opposed by union

GM Korea is planning to establish a new entity that will focus on research and development of global products within this year.

But its labor union is angry about the idea, according to industry sources Sunday.

Under the plan, the Korean unit of GM will split its existing corporation into two entities, one dedicated to car manufacturing and the other focused on R&D, the sources said.

GM Korea claims this is essential to make the R&D entity a strategic base for the parent company’s car design and development. While the current design center under GM Korea is only involved in developing compact cars, it is trying to expand the center’s role to designing and developing popular sport utility vehicles as well.

A GM Korea spokesperson told Yonhap News Agency Sunday that it is more efficient to have the R&D unit independent for active communication and cooperation with GM headquarters considering executives from the headquarters are very involved in global R&D projects.

The carmaker’s labor union, however, strongly opposes the plan. It says the company’s ultimate goal is to close down or sell production lines in Korea and maintain business only with the new R&D unit.

The Korean carmaker refuted that idea, saying there is no reason for it to close production lines in Korea after it committed to a 10-year turnaround plan to get continued support from the Korea Development Bank (KDB).

It also explained that the separation of production and R&D units is not a new strategy. It has been done by Opel in Europe and Shanghai GM in China.

Still, after GM Korea’s Gunsan plant in North Jeolla - one of four plants the company operated in the country - closed down in May due to low operating rates, tension between the union and the company is growing.

In the meantime, the KDB, GM Korea’s second largest shareholder, filed an injunction in a court to halt the carmaker’s rapid move to make a new R&D entity without much explanation. The carmaker has been rushing to hold a board of directors meeting and shareholders meeting to push through the plan, according to sources.

The court’s decision is expected to come in the coming week.

If the court grants the injunction request, it will become difficult for GM Korea to split the corporation into two within this year as the company will have to spend more time persuading its labor union as well as the KDB.

GM Korea and its union have been at odds from the beginning of the year as the company struggled to survive due to a lack of popularity of the models produced in Korea, including Chevrolet Orlando SUVs and Cruze sedans.

This led the carmaker to announce in February a plan to shut down the Gunsan plant. The announcement sparked three months of negotiations between the company, the Korean government, workers and other stakeholders to keep GM from leaving the country altogether.

The negotiations resulted in a 7.7 trillion won ($6.9 billion) worth rescue package for GM Korea, for which the Detroit headquarters covers 6.9 trillion won and the state-run KDB covers the balance.

BY KIM JEE-HEE [kim.jeehee@joongang.co.kr]