[Aju News DB]
SEOUL -- The South Korean unit of U.S. carmaker General Motors will receive a bailout of 7.15 billion US dollars from its parent group and creditors to keep its troubled operation running under a deal that would quash a row sparked by the shutdown of one plant.
The U.S. carmaker will convert $2.8 billion owed by GM Korea into shares by the end of this year and extend loans worth $3.6 billion for facility investment. GM cannot sell any of its stake in GM Korea over the next five years with its stake staying above 35 percent from 2023 to 2028.
For its long-term presence, GM will set up its Asia-Pacific headquarters in South Korea, run a crash test site at its research and development center and build a new painting factory. The company promised to produce two new models in South Korea, but GM's new Asia-Pacific office in South Korea will not cover in China.
GM has an international headquarters in Singapore but it reduced staff last year as part of global restructuring.
Korea Development Bank (KDB), the second-largest shareholder with a 17 percent stake, agreed to inject $750 million into GM Korea by the end of this year. The state-run lender will be given a veto power in key management decisions.
GM's decision on February 13 to close one plant in the southwestern port city of Gunsan by the end of May as part of its global business restructuring triggered concerns about layoffs at other plants in South Korea.
For two months, GM has been locked in tough negotiations with union leaders over how to contain the fallout from the shutdown of its Gunsan plant. The carmaker has also demanded financial and other support from the Seoul government as well as preferential loans from KDB.
Finance Minister Kim Dong-yeon said that the bailout for GM Korea would have a positive impact on South Korea's economy, pointing to criticism that the government was wasting taxpayers' money. "The deal will have a positive impact on industrial production, exports, employment and the regional economy," he said.
"With the negotiations (with GM) settled, the decision will positively impact a broad range of economic issues, including industrial production, exports, employment and regional growth," Kim said.
GM Korea applied for government approval to designate its factory sites as foreign investment zones to receive corporate tax benefits. Policymakers have yet to approve the request, saying the company should invest in new technologies related to next-generation cars.
A memorandum of understanding signed by South Korea's trade, industry and energy minister Paik Un-gyu and GM International President Barry Engle called for production of auto parts in GM's local design and technology center. GM agreed to collaborate on the development of technologies for autonomous driving and electric vehicles.
reporter
Lim Chang-won
cwlim34@ajunews.com
