GM president calls for ‘shared sacrifice’ to fix ailing South Korean operation
DETROIT: General Motors President Dan Ammann said the automaker’s troubled South Korean operations can be a “sustainable, profitable business” if unions and the South Korean government agree quickly on a restructuring.
GM has warned Korean officials the unit faces a “cash crisis” in the first quarter without new funding. Nearly 2 trillion won ($1.88 billion) of GM Korea’s debts to its parent are due by the end of March or early April, according to a regulatory filing.
“Time is short and everybody must move with urgency,” Ammann told Reuters in an interview on Monday when asked if March 31 was a deadline for action.
The state-funded South Korean Development Bank said on Monday it had begun a due-diligence review of GM’s South Korean unit as part of its decision whether to inject more capital into the money-losing operation.
GM officials have outlined plans to invest up to $2.8 billion in the South Korean operations and convert into equity about $2.7 billion in debt owed by the unit to the parent company, according to Korean government officials and a GM letter reviewed by Reuters.
Ammann said that if the automaker, the South Korean government and unions can agree on a restructuring plan “there is investment in the business, new product programs that we would look to allocate” to South Korea.
“It’s a classical restructuring where everybody needs to contribute something in order for everybody to end up in a better place with a sustainable, profitable business.”
New product investments would result in South Korea building vehicles that are part of GM’s global product lineup and could be sold in other markets, he said.
GM on Tuesday asked South Korea to designate its factory site in the city of Bupyeong as a foreign investment zone to be eligible for corporate tax benefits, an official at Incheon Metropolitan City told Reuters.
The official declined to elaborate on GM’s proposal.
To be eligible for the designation, manufacturers have to construct new factory facilities with foreign investment of more than $30 million, or invest more than $2 million in building or expanding research and development facilities. —
GM Korea workers from the Gunsan factory protest in Seoul as the company faces a funding crisis. (Reuters)