General Motors confirmed information about a proposed investment in its loss-making South Korean company on Friday, however stated it went through support from Seoul and GM’s Korean union.
GM Korea stated that without new financing from its significant investors it would have a first quarter “cash crisis”.
Barry Engle, President of GM International, stated in a company letter observed by Reuters, that the automaker would tidy up GM Korea’s balance sheet by converting into equity $2.7 billion in debt held by General Motors itself.
Engle stated GM would “fund its part of the $2.8 billion in investment needed to bring products to market and update the tooling and equipment to build them.”
The proposed plans remain in line with information formerly reported by Reuters.
GM Korea confirmed the content of the letter but stated the automaker’s further investments would depend on a deal between it and other parties consisting the government and the union.
“GM has stated it will just offer additional funding if there is agreement on the required shared sacrifices with the union, the Government and the KDB,” GM Korea stated.
KDB is South Korea’s state-run bank that holds a 17 percent stake in GM Korea, which stated has approached five commercial banks to raise funding, but these has been declined.
Almost two trillion won ($1.88 billion) of General Motors Korea’s loans to its parent are due by end-March or early April, according to its regulatory filing and the company.
KDB stated that Engle met its chairman on Friday and agreed to begin a due-diligence on the debt-ridden Korea system next week. The South Korean government says this is a required action to choose whether to offer financial support.
