FILE PHOTO: The logo of GM Korea is seen at its Bupyeong plant in Incheon, South Korea March 29, 2018. REUTERS/Kim Hong-Ji/File Photo
May 9, 2018
By Hyunjoo Jin and Joyce Lee
SEOUL (Reuters) – South Korea said on Wednesday that an impending deal with General Motors <GM.N> to refinance its local unit will ensure the U.S. automaker remains in the country for at least 10 years, as its rights to sell shares and assets will be curtailed.
GM and South Korea reached a preliminary agreement last month to inject $4.35 billion into the loss-making unit to keep it afloat. GM has also announced plans to close one of its four South Korean plants, cut headcount by almost 3,000 and has reached a deal on wages with its workers.
“At least 10 years will be guaranteed,” Finance Minister Kim Dong-yeon said in a radio interview, adding that one key condition of the deal will be Korea Development Bank, which owns 17 percent of GM Korea, regaining veto power over asset sales.
“We will make sure GM contributes to the South Korean economy by running normal operations for the long term,” he said.
While a final agreement is expected this week, industry watchers are skeptical this will mean the end of restructuring for the unit, as the automaker’s sale of its Opel brand in Europe last year is expected to further hit production levels.
“I expect GM to restructure its South Korean unit on a regular basis,” said Lee Hang-koo, a senior researcher at the Korea Institute for Industrial Economics and Trade.
The preliminary agreement with GM calls for the state-run bank to regain the power to block the sale of more than 20 percent of the unit’s assets, a KDB official has previously said. The veto right, which had been in place since 2002 when GM acquired failed Daewoo Motors, expired in October.
GM is expected to extend loans of up to $3.6 billion while KDB is set to inject $750 million, the finance minister said.
A GM Korea spokesman declined to comment, saying talks are ongoing. KDB also declined to comment.
Kaher Kazem, GM Korea’s CEO, said in an internal letter on Tuesday that it plans to reach a binding, final agreement with the government on Friday.
GM relies on its plants as a key export hub, building vehicles for the United States and other countries but production needs dropped after GM decided in 2013 to pull its Chevy brand from Europe.
The U.S. automaker has said it will introduce two new models to South Korea to boost sagging utilization rates.
(Reporting by Hyunjoo Jin and Joyce Lee; Additional reporting by Ju-min Park; Editing by Edwina Gibbs)
