The management and labor of General Motors(GM) Korea struck an agreement on the firm's self-rescue plan with just an hour left to their negotiation deadline on Monday.
The dramatic last-minute settlement has saved the automaker from entering into court receivership.
The government said it respects the decision reached between GM Korea and its union, and promised to conduct due diligence as quickly as possible and discuss normalization measures.
Following overnight negotiations, management and labor representatives of GM Korea announced they tentatively reached an agreement on pay and other work conditions.
This comes after 14 rounds of negotiations since early February.
The two sides managed to find a middle ground on the key issue of employment guarantees for workers at GM Korea's Gunsan plant, which is planned to be shut down.
Workers accepted a wage freeze, no bonuses and suspension of some work benefits. In return, the company will offer a voluntary retirement program for the remaining 680 workers at the Gunsan plant and also job transfers for those who do not wish to leave the company.
GM Korea President Kaher Kazem said the labor union has demonstrated its commitment and ratification of the tentative agreement which is critical to the firm's viability.
Following news of the deal, the government stressed in a press release the need to swiftly normalize the company's operations through concerted efforts.
It also reiterated the three principles on tackling the GM crisis, namely a responsible role of the shareholders, pain-sharing by all parties of interest, and long-term measures for sustainable management.
The GM crisis came about when the firm announced in February that it would shut down its Gunsan plant, citing management woes.
The automaker has been under financial strait amid sluggish exports and the global restructuring drive pushed by its U.S. headquarters.
If GM withdraws from South Korea, numerous jobs will disappear and many partner firms and subcontractors will go bankrupt. The whole Korean economy will be affected.
For one, the Gunsan region would face an immediate blow with the plant closure, highlighting the importance of timely state support and the firm's own measures to limit its impact.
As conditions for financial support, the government and Korea Development Bank(KDB) requested the firm to keep its operations in Korea for more than ten years. The bank also asked to be able to exercise veto power over GM's key management decisions despite its reduced stake in the Korean unit following a capital reduction and debt-to-equity conversion.
The terms are viewed as a safety net to prevent a similar crisis from recurring.
The firm has avoided court protection but the GM head office is urged to show sincerity in its will to salvage its Korean unit.