General Motors has proposed an investment of $2.8 billion into its loss-making South Korean operations over the next 10 years and has asked Seoul to offer its share of the funds, a South Korean government official stated on Wednesday.
The United States automaker revealed last week it would close down a factory in Gunsan, southwest of Seoul, which it was mulling the fate of its three remaining plants in South Korea.
The automaker has 77 percent of its South Korean unit GM Korea, while state-run Korea Development Bank (KDB) has a 17 percent stake. GM’s main Chinese partner, SAIC Motor, manages the remaining 6 percent.
The authorities, who had direct understanding of the matter, stated GM had asked South Korea to inject funds into GM Korea through KDB. On the basis of its shareholding, KDB would provide around $476 million in investment.
The $2.8 billion financial investment proposal is different from an approximately $2.7 billion debt-for-equity swap GM is offering to obtain financial backing and tax benefits from Seoul, the official and a lawmaker stated. Reuters first reported the details of that part of the plan on Tuesday.
A GM Korea spokesperson stated she can not confirm details of the investment.
South Korea’s trade minister, Paik Un-gyu, informed parliament on Wednesday the government had first asked for an audit into GM’s “opaque” operations in the nation, which directly use some 16,000 employees.
“By opaque we indicate the high cost of goods, interest payments relating to loans and unreasonable financial support made to GM’s headquarters,” the minister stated.
Paik stated the South Korean government needed reassurance from GM on its long-term dedication to the country before it can dedicate funds.
