GM Korea to get US$7b investment in rescue deal

12 May, 2018, 06:19 | Author: Lillian Steele
  • S. Korea Preparing to Participate in Pyongyang Table Tennis Tournament

General Motors Co's South Korean unit reiterated on Friday that it should return to profitability by 2019 and that it will invest $2.8 billion in a new, small SUV as well as a crossover vehicle for the local market and for export.

In the four years through 2017, GM Korea posted more than 3.134 trillion won (about US$2.8 billion) in accumulated net losses due to a lack of new models and lower demand.

Under a preliminary contract, GM may even buy more parts out of Southern Korean suppliers to get its global operations, fostering procurement from around 2 trillion won (£1.85 billion) annually at the moment, the market ministry said in an announcement.

An existing $2.8 billion loan to GM Korea will be converted into preference shares, saving the unit 150 billion won (US$110 million) in interest every year.

GM has stopped manufacturing in Australia and Indonesia, and significantly restructured its Thai operations.

Even though the deal keeps GM in South Korea for a decade, Finance Minister Kim Dong-yeon said it also sets the stage for the automaker to stay in the country "continuously beyond 10 years".

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GM now owns 77% of GM Korea and KDB has a 17% stake, with the remaining shares held by China's SAIC Motor.

"Together with the KDB, the Korean government, the labor union and our supplier partners, we have created all of the building blocks for executing a long-term viability plan that will be good for our people, good for our company and good for Korea", GM Executive Vice President Barry Engle said in a statement.

The new regional headquarters will oversee production, sales and technology development for Asia Pacific countries, which excludes China, but includes Australia, India and Thailand among others, a ministry official told Reuters.

South Korea was also hit from the revamp, with GM planning to shut down a among 4 regional factories that this season and reduce its community work force by nearly 3,000 positions.

GM Korea's turnaround largely depends on demand for its vehicles.

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