South Korea stated on Wednesday that a possible deal with General Motors 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 restored.
GM and South Korea reached a primary agreement last month to invest $4.35 billion into the money-losing 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 agreed a deal on wages with its workers. “At least 10 years will be ensured,” Finance Minister Kim Dong-Yeon said in an interview, adding that one key condition of the deal will be Korea Development Bank, which owns 17 percent of GM Korea, recouping veto power over asset sales. While a final agreement is expected this week, industry watchers are doubtful this will mean the end of restructuring for the unit, as the automaker’s sale of its Opel brand in Europe last year is anticipated 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 government-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, stating talks are ongoing. KDB also refused 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. The automaker has said it will introduce two new models to South Korea to increase sagging utilization rates.