South Korea stated on Wednesday that an upcoming deal with General Motors to refinance its regional unit will confirm the U.S. automaker remains in the country for at least one decade, as its rights to sell shares and assets will be curtailed.
GM and South Korea reached an initial agreement last month to spend $4.35 billion into the loss-making unit to keep it afloat. The automaker has also announced strategies to close one of its four South Korean plants, cut headcount by nearly 3,000 and has reached a deal on wages with its employees.
“At least 10 years will be guaranteed,” stated Finance Minister Kim Dong-yeon in a radio interview, adding that one major condition of the deal will be Korea Development Bank, which has 17 percent of GM Korea, regaining veto power over asset sales.
“We will assure GM contributes to the South Korean economy by running normal operations for the long term,” he stated.
While a final agreement is expected before next week, industry watchers are skeptical this will mean the end of restructuring for the unit, as General Motor’s sale of its Opel brand in Europe in 2017 is expected to further impact production levels.
“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.
The initial agreement with GM calls for the state-run bank to get back the power to block the sale of over 20 percent of the unit’s assets, a KDB official has earlier stated. The veto right, which had been in place since 2002 when the automaker acquired failed Daewoo Motors, expired in October.
General Motors is expected to extend loans of up to $3.6 billion where as KDB is set to inject $750 million, the finance minister stated.