[Editorial] GM headquarters clearly intends to betray its agreement with KDB

The west gate of GM Korea’s Bucheon factory

Confusion is brewing once more about GM Korea’s plan to normalize business operations. In brief, the GM corporate headquarters bears the lion’s share of the blame.

During a meeting with executives at the GM Korea labor union on Mar. 7, Jeon Ju-myeong, GM Korea’s vice president for technical research, said that GM Korea would be in charge of R&D for the crossover utility vehicle (CUV) that will be produced at the Changwon factory, but that GM’s compact sports utility vehicle (SUV) has been assigned to China since the company thinks that will be more effective. Jeon’s announcement contradicts an agreement that the GM headquarters reached with the Korea Development Bank (KDB) in Dec. 2018.

While announcing the plan to spin off a separate corporation that would take charge of GM Korea’s R&D operations, the GM headquarters promised that the new corporation would be designated as a key base for developing compact SUVs and CUVs and that it would be given additional R&D work as part of an effort to guarantee the company’s sustainability for at least a decade. While the KDB had initially been opposed to the corporate spinoff, it eventually switched to support and provided an additional 400 billion won (US$352.77 million) in aid in the conviction that GM would keep its word.

Following an outcry about the news, GM Korea explained on Mar. 8 that “nothing has changed about what we announced at the time of the corporation’s establishment in Dec. 2018.” But the company also said that work on the 9BUX, which is being developed as a successor to the Trax, will be done in Korea, but that the compact SUV won’t be developed in Korea. In other words, GM’s Korean R&D arm will be assigned a vehicle whose development is already well underway instead of the new vehicle that was offered as a condition for the corporate spinoff. That also clashes with GM Korea Chief Executive Kaher Kazem’s promise that Korean engineers would develop the GM’s next-generation compact SUV, which he made in his announcement of the plan for the corporate spinoff in July 2018.

The GM headquarters already lost its credibility by going back on its word several times, and the only way to interpret this latest announcement is as being yet another attempt to betray the spirit of its agreement to normalize operations at GM Korea. This is unacceptable behavior for the GM headquarters, which is GM Korea’s largest shareholder and bears the greatest responsibility for the company’s financial difficulties. The GM headquarters has already been accused of attempting to “dine and dash” several times, such as when it abruptly closed the Gunsan factory in Feb. 2018 and when it unilaterally pushed through its plan to spin off its R&D operations in July.

“9BUX isn’t the development project that we were promised. If they don’t abide by the agreement, we may have to take the necessary measures,” said the KDB. The KDB needs to aggressively exercise its authority as GM Korea’s second biggest shareholder to block the GM headquarters’ hard-charging management style. GM Korea has been given trillions of won in subsidies over the years, including 800 billion won last year. That assistance was provided to prevent a lot of people from losing their jobs. GM mustn’t be allowed to stab Korea in the back anymore.

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