Govt. says GM's 'sustainable' plan for Korean unit essential for financial support

By Yonhap
  • Published : Mar 14, 2018 - 18:00
  • Updated : Mar 14, 2018 - 18:00
The chief of Korea's financial regulator said Wednesday the government's financial support will be possible if General Motors Co. outlines a "long-term and sustainable" plan to turn its loss-making Korean unit around.

In a press conference held in Seoul, Financial Services Commission Chairman Choi Jong-ku said the government and the state-run Korea Development Bank understood that GM strongly wants to maintain its production facilities in Korea.

"The government's financial support depends on how long-term, sustainable and specific the plans GM will come up with to revive its Korean unit are," he said.

In this photo taken March 14, 2018, Financial Services Commission Chairman Choi Jong-ku answers questions on the government`s stance on possible financial support to GM Korea and the planned sale of Kumho Tire to China`s Qingdao Doublestar at a press conference held in Seoul. (Yonhap)

On Wednesday, PricewaterhouseCoopers began its due diligence process on GM's Korean unit on behalf of the KDB-led creditors, with an aim to complete the review by the end of April.

If GM fully cooperates with due diligence by submitting all required materials to the Korean policy lender and offers "concrete" assurances of its commitment, the KDB is willing to extend a bridge loan, the bank said in a statement.

A bridge loan is a short-term, high-interest loan that provides a quick source of cash for company or individual needs.

But if GM's cooperation is not satisfactory, the bridge loan it requested won't be delivered, the statement said.

The due diligence comes a month after GM announced its plan to shut one of its four car assembly plants in the country by May and decide on the fate of the remaining plants within weeks. The US carmaker said it would face a cash crisis during the first quarter if no new funding comes from GM Korea shareholders.

If Seoul extends a financial helping hand, GM claimed it will convert into equity all of the outstanding $2.7 billion debt held by the US carmaker, fund its portion of a planned $2.8 billion investment in products and facilities and allocate two new vehicles to its Korean plants.

The KDB is the second-biggest shareholder in GM Korea, with a stake of 17 percent, while GM and SAIC Motor Corp. control 77 percent and 6 percent, respectively.

As part of its self-help program, GM Korea asked its union to accept a wage freeze, forgo bonuses this year and agree to the suspension of some worker benefits, such as school tuition for employees' children and free lunches.

On Thursday, GM Korea's 13,000-member union said they will hold a press conference to announce their position on the company's proposals in this year's wage talks.

As for the KDB's planned sale of Kumho Tire Co. to China's Qingdao Doublestar Co., the chairman urged the tiremaker's union to accept the plan.

Kumho Tire's 3,000-strong union went on strike at three local plants on Wednesday in protest at the plan, causing two union leaders to end their demonstration atop a utility pole near the tiremaker's plant in Gwangju, 330 kilometers south of Seoul.

"To help Kumho Tire stay afloat and put it back on track, the only option (for creditors led by the KDB) is to sell it to Doublestar. The union needs to understand what the reality is and closely cooperate with the company (to avoid a court receivership)," Choi said.

Unless the union agrees to the company's M&A plan and accepts reductions in wages and work benefits by the end of this month, the country's second-largest tiremaker will be placed under court receivership, the KDB said.(Yonhap)