Published: Sat, May 12, 2018
Global News | By Blake Casey

GM Korea to get US$7b investment in rescue deal

GM Korea to get US$7b investment in rescue deal

General Motors will stay in South Korea for at least 10 years and set up its Asia-Pacific headquarters in the country, government officials said on Thursday, revealing terms of a deal aimed at rescuing the USA automaker's struggling GM Korea unit.

GM is one of the biggest players in the global industry but its South Korean subsidiary is loss-making and has seen production fall by nearly half in the last decade.

GM's restructuring plans include a shutdown of one of its four plants in South Korea and reducing its workforce by almost 3,000.

Even though the deal keeps GM in South Korea for a decade, Finance Minister Kim Dong-yeon said it also sets the stage for the automaker to stay in the country "continuously beyond 10 years".

The U.S. auto maker's Korean unit averted a bankruptcy filing with a wage deal clinched last month, but analysts and customers, as well as the South Korean government, have had doubts about GM's commitment and about how long the loss-making company will remain in business.

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GM will invest US$2 billion in facilities over 10 years and spend US$1.6 billion on corporate restructuring and operational costs.

"I expect GM to restructure its South Korean unit on a regular basis", stated Lee Hang-koo, a senior researcher at the Korea Institute for Industrial Economics and Trade.

GM now owns 77 per cent of GM Korea and KDB has a 17 per cent stake, with the remaining shares held by China's SAIC Motor.

Under the deal, GM will remain in South Korea for at least 10 years, with KDB regaining veto power over GM's rights to sell assets in the country. GM Korea's annual production fell to 520,000 units in 2017 from 940,000 units in 2007.

Apparently alluding to criticism of taxpayer-funded bailouts of loss-making shipbuilders, the government said GM Korea will surely survive and turn around with the latest funding if GM carries out its promises to allocate two new vehicle models to Korean plants.

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