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General Motors' South Korean unit is planning to slash the number of its executives, the latest step by the U.S. automaker as it tries a politically contentious restructuring of the loss-making business.

GM Korea will cut the number of executives ranked managing director or more senior by 35 percent and reduce the number of directors and team leaders by 20 percent, said the letter, which was addressed to staff.

It also plans to slash the number of so-called “international service personnel” executives, who have been sent off from GM headquarters and other affiliates overseas, by 45 percent, according to the letter.

A GM Korea spokesman confirmed the plan, noting that the unit had around 150 executives and hundreds of team leaders.

"Changing our leadership structure is another of many initiatives to move forward the viability of the company," he said.

 GM, which consists of some 16,000 employees in South Korea, requested staff to "actively consider" a previously announced voluntary dismissal plan which has a Friday deadline, a separate letter showed.

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Union Talks Making Little Progress

The U.S. automaker made a shocking announcement to South Korea this month when it announced it would shut one of its factories in the country and decide the fate of three remaining plants in the coming weeks.

The letters emphasize the difficulties GM faces as it tries to fall out with concessions on wages from a mad labor union and win financial support from a South Korean government that is set to conduct due diligence on what it’s called GM Korea’s “opaque” management.

Although talks with unions have come much earlier than expected with union leaders under pressure to make concessions to prevent more factory closures, a union official said, adding that initial discussions on Wednesday had not made any progress.

Moreover, In talks with the union, GM is proposing a base wage freeze and no bonuses this year, along with a suspension of some benefits such as the payment of university tuition for employees' children and gold medals for long-serving workers.

The talks on Wednesday ended after just a couple of hours, the union official said.

"Management is demanding a unilateral sacrifice by the union, but the company should come up with a turnaround plan," the official said, adding that demands by the union for executives' wages to be disclosed had been rejected.

 

GM’s Interest Rates

For years, General Motors resisted calls from South Korean officials to cut interest rates it was charging on nearly $3 billion in loans to its loss-making South Korean unit.

South Korean officials and politicians blame GM’s high-interest rates for exacerbating losses at GM Korea, which was already struggling with slumping exports to Europe.

“Board members asked for interest rate cuts at almost every meeting, but GM turned a deaf ear,” a GM Korea board member.

“From a South Korean perspective, it is not right for the biggest shareholder to receive such a high-interest rate when lending money to its affiliate,” said the board member.

The U.S. parent company told the board it had to apply equal rates for loans extended to its affiliates and couldn’t give GM Korea “preferential treatment”, the board member said.

A spokesman for GM in Detroit said the company does not disclose specific details of its internal financial practices.

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