GM Korea's Rescue Package Finalized

  • By Kim Seong-min

    May 11, 2018 13:14

    The government and General Motors agreed on Thursday to inject W7.7 trillion into GM Korea to revive the ailing Korean subsidiary (US$1=W1,073).

    The agreement marks the end of the worst crisis at GM Korea, which began on Feb. 13 when it decided to shut down its assembly plant in Gunsan.

    GM promised to invest W6.7 trillion, while state-run Korea Development Bank, the largest shareholder, will inject W805 billion.

    GM will also set up its Asia-Pacific headquarters in Korea and swap W3 trillion in loans to the Korean unit into equity. It will provide W870 billion to cover restructuring costs, including severance payments for staff who took voluntary retirement as part of downsizing measures. The remaining W3 trillion will go into facilities investment, research and development, design and support for ailing subcontractors.

    According to the Ministry of Trade, Industry and Energy, GM's revived Asia-Pacific headquarters, which was originally shut down in January last year to merge with the Central American headquarters, will work on selecting and distributing new models as well as supplying auto parts.

    The government declined a request by GM to designate its plant in Incheon as a foreign investment zone subject to tax breaks and other incentives but said it is willing to reconsider if GM submits another application and meets the criteria.

    But all is not well at the Gunsan plant, which is slated to be closed in late May, as around 650 workers remain there despite several rounds of early-retirement applications. GM management will discuss whether to relocate them to other Korean plants or offer them long-term leave.

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