UPDATE 1-GM Korea reaches tentative wage deal, avoids bankruptcy

(Add GM Korea CEO comments, background)

SEOUL, April 23 (Reuters) - General Motors Co's South Korean unit on Monday said it has reached a tentative wage deal with its labour union, meeting a key condition laid down by the U.S. automaker to prevent it filing for bankruptcy for the money-losing operation.

With the deal, GM Korea's board has dropped its plan to vote on Monday on filing for bankruptcy protection, a GM Korea spokesman said.

The U.S. automaker shocked South Korea in February when it unveiled a major restructuring plan for the unit, which involved shuttering one of its four plants in the country and voluntary redundancies for 2,600 workers.

GM has sought wage concessions from the union as well as government funding and incentives to save its remaining three South Korean factories.

The board of GM Korea delayed a decision to file for court-managed bankruptcy protection until Monday evening, after the automaker failed to reach a wage deal with its labour union in time to meet a Friday deadline.

"Through the latest agreement, GM Korea will be a competitive manufacturing company," Kaher Kazem, chief executive of GM Korea, said in a statement in Korean.

The deal would pave the way for the Korea Development Bank (KDB) to provide support and for GM to allocate new models to South Korea to help turnaround GM Korea, the unit said in a statement.

KDB is GM Korea's second-largest shareholder with a 17 percent stake. The U.S. automaker owns 77 percent of GM Korea, while GM's main Chinese partner, SAIC Motor Corp Ltd , controls the remaining 6 percent.

The government had stepped up pressure on GM and the union to reach an agreement, saying without a swift deal, some 150,000 jobs at the automaker and its suppliers would be at risk.

KDB's chairman told Reuters last week the lender may sign a preliminary agreement by April 27 to provide financial support for the business should an interim due-diligence report that was due last Friday turn out to be satisfactory.

Over the past three years, GM has sought to focus on profitable markets, mainly the United States and China, and new technologies such as electric and automated vehicles.

The South Korean unit, once the backbone of GM's Asian strategy, has been hobbled by labour costs and hurt by the automaker's decision to pull its Chevrolet brand from Europe, a key export market.

The unit still makes more than 1 million assembled or partially assembled vehicles for the United States, European and emerging markets. They include the Chevrolet Trax and its sibling, the Buick Encore, which are sold in the United States.

It is also an engineering and design source for GM's small vehicles and electric vehicles, as well as home to some of GM's top-ranked suppliers globally.

(Reporting by Hyunjoo Jin Editing by Jacqueline Wong)