Deal to rescue GM Korea reaches final stageRescue negotiations over General Motors’ Korean operations are in their final stage, the country’s chief economic policymaker said Wednesday, with the Detroit-based carmaker having agreed to maintain its operations here for at least 10 years.
GM and the Korean government have been engaged in talks over the self-rescue plan since February, when the U.S. automaker announced a massive job cut and a plan to shut down one of its four plants here.
“We are in the final stage, and talks are underway,” Finance Minister Kim Dong-yeon said in a radio interview.
“We are talking about GM’s normal operations here over the long haul and its dedication to our economy.”
The minister emphasized the U.S. automobile giant has agreed to keep its operations here for at least 10 years.
Late last month, GM signed a conditional agreement with Seoul to help resolve the liquidity problems facing its Korean unit.
In the deal to be finalized soon, GM and the Korea Development Bank (KDB) agreed to inject a combined 7.7 trillion won ($7.15 billion) - 6.9 trillion won from GM and 810 billion won from the KDB - into the cash strapped carmaker.
In exchange for a fresh loan from the KDB, whose 17 percent stake in GM Korea Co. makes it the carmaker’s second-biggest shareholder, the U.S. auto giant vowed to allocate two new vehicles to its Korean plants. It also agreed to give the Korean policy lender veto power in key management decisions.
In February, GM unveiled its restructuring plan for its Korean operations.
The Detroit carmaker said it will shutter one car plant by May, while asking GM Korea workers to make some wage concessions and the KDB to provide financial support to turn the Korean unit around.
Back then, GM offered to share an investment of $2.8 billion between its Korean unit and the KDB in the next 10 years through 2027.
GM’s three remaining local plants are also expected to be designated as foreign investment zones, thereby making them eligible for extensive tax benefits.
If the plants are designated as foreign investment areas, GM Korea will be exempt from corporate taxes on its profits for the first five years and then pay only 50 percent corporate tax for the following two years.