(3rd LD) GM Korea says separate R&D not aimed at laying foundation for exit

(ATTN: ADDS union's strike plan in paras 9-13)

SEOUL, Oct. 22 (Yonhap) -- GM Korea Co.'s recent decision to set up a separate R&D corporation is not a move to leave the country but part of GM's broader restructuring plan, a company executive said Monday.

In a parliamentary audit, Vice President Choi Jong said the carmaker's plan to spin off its research and engineering divisions in December should not be seen as U.S. parent General Motors Co.'s efforts to scale down operations in the long term. He said such speculations are groundless.

On Friday, GM, which holds a 77 percent stake in GM Korea, approved the R&D separation plan at a shareholders meeting. The Korea Development Bank (KDB), the second-biggest shareholder with a 17 percent stake, did not take part in the gathering, where it could have voiced opposition due to union obstruction.

The plan was not covered in the agreement between GM and the KDB signed in May to put the loss-making GM Korea back on track. The KDB said GM mentioned the R&D firm issue back then, but no consultations have taken place.

"The most urgent task (for GM) is to normalize GM Korea's businesses, and the R&D plan is also in line with (GM's) efforts to revive (the competitiveness of) the company," Choi said.

In the same audit, KDB Chairman Lee Dong-gull said the state lender will be able to stand by GM's R&D separation plan "only if it strengthens the company's overall competitiveness."

As for GM's "unilateral" approval of the R&D company, the KDB said it is "giving serious consideration" to filing an injunction against the separation plan to avoid any negative impact on GM Korea as a whole.

The KDB had filed an injunction against GM Korea's shareholders' meeting, but it was rejected by a local court. The court said there were no urgent concerns that the KDB would suffer "irreparable damage" if the shareholders meeting was held.

In opposition to the separation plan, the union of GM Korea decided to go on a partial strike starting Friday.

"We've decided that some 240 leading officials of the union will take the collective action," a union official said. GM Korea's union has more than 10,000 members.

"In case things don't make a turnaround, we will go for a general strike," he stressed.

The decision came despite their failure to obtain approval from the National Labor Relations Commission to stage a walkout, as the organization judged that the issue of R&D separation does not constitute a condition for a walkout.

Last week, more than 78 percent of the union voted to go on strike to protest the corporate plan, which they see as a preliminary step to shut down its car manufacturing facilities in the country. They expressed concerns that GM will, in the long run, only maintain a research facility here.

In May, GM and KDB signed an agreement to permit a combined 7.7 trillion-won (US$6.7 billion) lifeline -- 6.9 trillion won from GM and 810 billion won from the KDB -- to keep the money-losing Korean unit afloat.

In the same month, the Detroit carmaker shut down one of its four car assembly plants in Korea due to a low utilization rate of 20 percent.

Any union action at GM Korea, meanwhile, could further weigh on the carmaker's earnings results this year, industry insiders claimed. The carmaker's sales fell 15 percent to 341,349 vehicles in the January-September period from 401,980 a year earlier.

In the 2014-2017 period, GM Korea posted 3.134 trillion won in accumulated net losses due to a lack of new models and weaker demand.

kdh@yna.co.kr

kyongae.choi@yna.co.kr

graceoh@yna.co.kr
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