Daewoo Lays Off 1,751 Workers

Friday, February 16th 2001, 12:00 am
By: News On 6

SEOUL, South Korea (AP) — Daewoo Motor Co. laid off 1,751 workers Friday after negotiations with its labor union broke down over how to restructure the company. Unionized workers are expected to go on strike next week in protest.

The job cuts are designed to make the ailing carmaker, Korea's third largest, more appealing as a takeover target for General Motors Corp. of the United States.

Daewoo Motor fired the workers immediately after last-minute negotiations with its labor union broke down.

``We have sent dismissal notices to 1,751 workers. With it, we have now completed our workforce restructuring,'' said Kim Sang-won, a company spokesman.

Daewoo Motor has been operating under court receivership since it filed for bankruptcy in November with estimated debts of $10 billion.

In return for emergency loans from creditor banks, Daewoo Motor had pledged to shed about 5,494 of its 16,149 workers, or 34 percent, by Friday. About 3,700 workers had already resigned voluntarily.

The government of President Kim Dae-jung has encouraged businesses to become leaner to help restore investors' confidence in the economy. The 1997-98 Asian financial crisis resulted in the collapse of Daewoo Motor and many other businesses that had recklessly expanded on borrowed money.

Friday's layoffs were the largest since South Korea revised its labor law in late 1997 to make it easier for businesses to lay off workers. But layoffs are a shock to workers, accustomed to lifetime employment.

``We will fight layoffs with all possible means,'' said Choi Jong-hak, a spokesman for Daewoo's labor union.

Friday's layoffs came after work hours.

Workers at Daewoo Motor's two major plants in southern South Korea were expected to go on strike Monday when their plants reopen. Together, the two plants can produce 500,000 cars and 46,000 commercial vehicles a year.

Daewoo's main plant in Bupyong, 18 miles west of Seoul, with an annual capacity of 500,000 cars, has been closed since Thursday.

The management said the temporary shutdown, which will remain effective until March 6, was meant to reduce bulging inventory of unsold cars. But it was also seen as an attempt to prevent striking workers from rallying inside the company premises.

Management expected the layoffs to accelerate takeover negotiations with GM. The U.S. auto giant began talks with Daewoo in September, but little progress has been made as GM reportedly was reluctant to proceed without layoffs.

During Friday's talks, labor leaders suggested that workers go on unpaid four-month leaves to help the company turn around. But management insisted on layoffs as essential to reviving the heavily indebted firm.

On Wednesday, the government-run Korea Development Bank, Daewoo Motor's main creditor, said banks will not extend new loans to Daewoo Motor if it fails to complete layoffs. Such an action will force the court to end receivership and liquidate the carmaker.

Credit banks provided Daewoo Motor, a flagship affiliate of Daewoo Group, with $144 million this year in emergency loans to keep the company afloat. They planned to infuse a further $584 million to the carmaker by June.