The Korean unit of General Motors Co. has asked the government to designate its factory sites as foreign investment zones that would make the automaker eligible for up to seven years of special benefits that can help with its turnaround plan, the commerce ministry here said Thursday.
The Ministry of Trade, Industry and Energy said GM Korea has submitted applications for factories in Bupyeong, west of Seoul, and in Changwon, on the nation's southeast.
GM Korea made the request to the Korean government amid negotiations with its labor union over the turnaround plan, following its decision to close its underutilized Gunsan factory by May.
The ministry said it will speed up the review process considering the schedule of GM Korea's restructuring plan, while pressuring the automaker to pledge its "long-term commitment" on its Korean businesses.
"We have asked (GM) to make clear (its investment plan) on advanced vehicle technologies," Paik told reporters in Seoul. "If assigns next-generation cars, such as autonomous vehicles, its Korean business will be able to be viable for the next five to 10 years."
To become foreign investment zones that would be eligible for corporate tax benefits, companies should invest over US$30 million for manufacturing and $2 million in research and investment, and meet other requirements.
Companies in the special zone are exempted from corporate taxes in the first five years and get 50 percent tax deductions in the next two years.
Paik also urged GM Korea and its labor union to speed up the negotiation process to allow the government to review its turnaround plan at an early date.
"A labor agreement should come first before any other decision is reached," Paik said.
GM has proposed a $2.7 billion debt-for-equity swap and $2.8 billion in investment over the next 10 years in return for financial aid through the state-run Korea Development Bank, which holds a 17 percent stake in GM Korea, and other tax benefits.
As a way to maintain its Korean business, GM has offered to produce two new models in South Korea to secure a production capacity of about 500,000 units per year.
Last year, GM Korea produced 520,000 vehicles at all its car assembly plants in Asia's fourth-largest economy. The company currently has a combined annual capacity of 910,000 units. (Yonhap)