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Officials from the Korea Development Bank (KDB) are barred from entering a general shareholders’ meeting for GM Korea outside the company’s main office in Bupyeong, Incheon, on Oct. 19. (Yonhap News)
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GM Korea general shareholders’ meeting passes move for separate R&D corporation, excluding KDB
GM Korea is once again at the center of a controversy. Rumors of its plan to pull out of South Korea are returning just over five months after quieting down in May when the administration and politicians managed to develop a management normalization plan. The key issue in the controversy concerns GM Korea’s partitioning. In a general shareholders’ meeting on Oct. 19, GM Korea approved a motion to a separate entity to perform research and development. The corporation currently planning to go ahead with the separation on Dec. 3. GM explained the decision as being meant for “easier pursuit of duties with the GM headquarters’ R&D division in order to develop and launch new models.” But the automaker failed to give a convincing answer on why its local branch should be split in two five months after a hard-fought management normalization plan was established. Contributing to the concerns over GM Korea’s division are overseas examples showing that the splitting of a finished vehicle company from its unified corporation form can create an environment favorable to factory downscaling, spinoffs and sales, and project withdrawal. Splitting corporation reminiscent of cases of Opel in Europe and GM in Australia GM Korea’s division is reminiscent of the case of Opel, a European subsidiary of GM. Peugeot-Citroën (PSA), which acquired Opel after GM sold it off, announced in July that it would be splitting and selling off Opel’s R&D center by 2020 to re-establish profitability. The labor union announced its readiness to strike against the R&D center’s sale – a similar situation to the one unfolding at GM Korea right now. GM also closed its production plant in Australia, leaving only a design center, and shut down one of two factories in India. “If the corporation is split up, neither the collective agreement nor the union will be carried over to the new entity. The company splitting up means the union splitting up and workers’ rights being split up,” said GM Korea union president Lim Han-taek. The union is viewing the move as a gambit to weaken the union’s resistance and reduce the Bupyeong plant in Incheon to a production subcontracting base, leaving only the new entity to facilitate a withdrawal in the long term as GM shuts down or sells off its production plant. KDB, 2nd largest shareholder, barred from attending Oct. 19 general shareholders’ meeting The legal validity of the Oct. 19 general shareholders’ meeting is also predicted to come up for debate. The motion of the corporation’s split was approved unilaterally by GM at a meeting where Korea Development Bank (KDB) – GM Korea’s second-largest shareholder with 17 percent – was not allowed to enter. KDB had originally planned to vote against the motion to approve the new partitioning plan and exercise its veto powers, with the intent of pursuing legal action such as a suitable to invalidate the meeting’s vote if GM Korea went ahead with the corporation split anyway. An hour before the meeting’s start at 2 pm that day, GM Korea president Kaher Kazem entered the president’s office reported as the meeting’s venue, at which point the union barred the door. KDB officials who arrived at the meeting’s start time were unable to enter. After they had waited for over an hour and a half, they were notified around 3:30 pm that the “meeting is over” and forced to turn back. In a statement, KDB said it had “attempted to attend the GM Korea shareholders’ meeting, but was unable due to obstruction by the union” blocking the venue’s entrance. “GM Korea held the meeting on its own and unilaterally notified us that the motion had been approved,” the bank added. “The meeting was not held according to normal procedures, and notified GM Korea clearly at the scene that this was a flawed shareholders’ meeting,” KDB said. With KDB absent from the Oct. 19 meeting, Kazem appears to have asserted his authority to hold it as chairman, with the motion approved through GM’s 83 percent share of the company. KDB to file suit to invalidate outcome of meeting The unexpected turn of events comes even after KDB gained veto powers in a basic contract with the GM Korea management normalization deal reached with GM in May. The agreement at the time required approval by 85 percent of ordinary shareholders for organizational changes and other special shareholder meeting resolutions; KDB holds a 17 percent share. For now, the bank appears poised to file suit to invalidate the outcome of the meeting, which was approved without the agreement of at least 85 percent of shareholders. It remains to be seen whether a court will acknowledge its veto powers. The significance of the management normalization agreement appears likely to emerge heavily diminished – and mutual distrust deeply intensified – as the limits of what amounts to KDB’s minority shareholder status become apparent five months after the basic contract was concluded. For now, questions are expected to surface over whether KDB should proceed with the full US$750 million in facility funding it agreed to invest in GM Korea. Among this amount, US$375 million has already been paid, with the rest scheduled for payment during December. The controversy appears poised to grow, with many contending that KDB is being taken for a ride by GM after its infusion of taxpayer money. Another problem is the possibility of GM using labor-management conflict and frictions as an excuse to renew its threats to pull out. Indeed, with the skills it has developed with restructuring at major workplace around the world, some observers have speculated that GM may have banked on just such a scenario from the beginning with its strategy. By Hong Dae-seon and Jung Se-ra, staff reporters Please direct comments or questions to [english@hani.co.kr]
