Due diligence on GM to begin later this weekKorea’s financial authorities are reportedly working on designing an agreement that will stipulate the full cooperation of GM and GM Korea on the due diligence of GM Korea’s financial statement, expected to kick off later this week.
Last week the Korean government and GM agreed on a review of GM Korea’s financial statement to be carried out by an outside auditor, Samil PWC.
The Korean authorities will include a clause that will require GM Korea to provide any information requested and GM’s full cooperation in the process.
The due diligence process usually takes two to three months, so the report could come out some time in May or June. However, both sides have reportedly agreed on speeding up the process to no more than two months.
GM Korea’s second-largest stakeholder, KDB, has claimed that in the past GM or its Korean operation have not fully cooperated in giving out sensitive information on the grounds of industry secrets.
In April 2016 KDB claimed it proposed an evaluation of the reasons behind the losses incurred at the Korean operation over the past three years but was rejected by GM and GM Korea.
In March KDB made another attempt using its shareholders’ rights but was stopped roughly a month later due to a lack of cooperation from GM Korea.
GM is currently accused of giving GM Korea loans at a high interest rate while also charging high costs on automotive parts.
Although GM appears to be taking a cooperative approach by extending GM Korea’s debt - estimated at 700 billion won ($650 million) and due to mature at the end of this month - for another month, the Korean government is reportedly sending a message to GM that it will not be led by the U.S. automaker in resolving the situation.
This message was passed on to GM executive vice president Barry Engle in a meeting with Vice Finance Minister Ko Hyoung-kwon on Thursday and reaffirmed during a meeting between Prime Minister Lee Nak-yon and representatives of GM Korea’s labor union and suppliers on Saturday.
“Putting the Gunsan plant back in production would be the best situation,” Lee said. “But it has to come under the premise of an accurate investigation to the cause that led to the plant’s insolvency as well as confirming what the intention and the authenticity of GM is.”
He said the reason behind the thorough investigation of the plant’s insolvency is important so that a similar situation will not be repeated and the government needs to find out how truthful GM is in resolving the crisis.
There have also been claims from industry experts that the Korean government needs to be cautious in making its decisions as it could involve funding from Korean taxpayers.
GM has gained a reputation for pulling out of countries when government financial support dries up.
GM Korea last week proposed making adjustments including freezing wages and cutting back on welfare that would save the company as much as 310 billion won.
BY LEE HO-JEONG [email@example.com]
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