The government and GM began a tug of war on Thursday to keep the U.S. automaker in Korea.
Seoul hopes to keep the ailing Korean subsidiary open to save jobs, and GM wants to squeeze as much money as possible out of the government in return.
GM has reportedly asked for a bailout of up to US$1 billion, but the government insists that it clear up its opaque management practices first and guarantee future investment.
Finance Minister Kim Dong-yeon told reporters GM must behave responsibly and come up with a sustainable management plan, and the GM union, shareholders and creditors must share responsibility.
There are two variables facing in the negotiations -- how much money GM intends to put into the Korean subsidiary and the results of the government's due diligence, which Kim said will take less than the usual three months.
GM's head of overseas operations, Barry Engle, met with government officials Thursday to convey the automaker's demands. He called on state-run Korea Development Bank to invest W650 billion into GM Korea in exchange for the U.S. automaker swapping $2.7 billion in loans to the Korean unit into equity (US$1=W1,086).
GM also asked KDB to buy its shares as it will invest $2.8 billion over the next 10 years. Another request was to turn Bupyeong in Incheon, where GM's main Korean plant is, into a foreign investment zone offering more benefits. The total amount GM is demanding surpasses W1.6 trillion.
But the government is not open to having KDB make new investments in GM. "The decision depends on whether a company's headquarters is sincerely interested in reviving a subsidiary," a government official said. "GM says it will invest $2.8 billion over the next 10 years, but we'll see just how credible that offer is."
The government and KDB insist that the owners of Korean businesses in restructuring put up their own money first before asking for government bailouts, extended debt-repayment deadlines and other aid.
But the government is skeptical after GM decided to shut down one of its three plants here and lay off more than 2,100 workers. Some industry watchers believe a realistic option would be to have GM headquarters guarantee any new investments or loans KDB provides for the Korean unit.