The Korea Development Bank reversed its initial opposition to GM Korea's plans to establish a separate research and development unit, Yonhap News Agency reported Dec. 18.
The report said the South Korean state-owned bank, which owns 17% of General Motors Co.'s South Korean arm, has reached a deal with the company to establish the GM Technical Center Korea Ltd. despite the Seoul High Court's ruling in late November against the proposed spinoff.
The move comes a week after the KDB said it will complete its $750 million capital injection into the company as part of a turnaround package signed in May.
GM Korea also met with its shareholders to approve the plan, the report said. Shareholders of Detroit-based GM, which owns 77% of GM Korea, approved the plan Oct. 19.
KDB chairman Lee Dong-gull told reporters that KDB will drop an injunction it filed against the proposed spinoff in October. Lee said there was no reason to oppose the move as it will "help promote R&D activities at GM Korea" and positively affect the company's manufacturing operations. He also cautioned that GM Korea's 10-year revitalization plan will also be impacted if the spinoff proposal is nullified.
In a statement, GM's Executive Vice President Barry Engle said it is now critical for all stakeholders to do everything they can "to deliver these important programs." The company has appointed senior executives to lead the separate R&D unit.
In response to the deal, GM Korea's workers union said it will stage an eight-hour strike on Dec. 19 and may consider holding further demonstrations. The KDB in November proposed a meeting between GM Korea and the union to discuss their differences. The carmaker's unionized workforce have strongly opposed the spinoff as they believe it is GM's first step toward gradually exiting the country. GM Korea has denied the speculation.