April 20, 2024

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[THE INVESTOR] GM Korea and Korea Development Bank on March 8 denied reports that the US carmaker had asked the bank to pay 85 billion won (US$79.03 million) to help cover voluntary retirement scheme costs.

“It’s true that we are suffering from liquidity issues, and are talking with KDB on how it can help, but we haven’t asked for any money,” a GM Korea spokesperson told The Investor, declining to be identified. 

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State-run KDB, which is the second-largest shareholder of GM Korea with a 17 percent stake, also said it had not received any specific requests. It declined, however, to comment on whether it would help out with the VRS costs. Officials added that inspecting GM Korea’s financial accounts before it provides any support, is its priority for now.

According to recent news reports, GM had asked KDB on March 6 to fork out the money after 2,500 employees signed up for VRS as of March 2. The carmaker reportedly said out of the 500 billion won needed, it would contribute only as much as its stake in GM Korea, which is around 83 percent. Industry watchers interpreted this to mean the carmaker would shoulder 415 billion won, while KDB would have to shell out the remaining.

The employees who volunteered to retire must be paid by mid-April. The month is also the deadline for GM Korea to pay back the 988 billion won it borrowed from GM headquarters.

Despite the denials, industry watchers forecast that GM will continue to push the Korean government to share its burden before allocating new models to Korea -- a move that many believe would make or break GM Korea’s future, as other carmakers have made dramatic turnarounds by introducing new cars.

In particular, the fate of GM Korea’s Changwon plant, which saw sales tumble 40 percent to 150,000 cars this year compared to four years ago, hangs in the balance since GM has already decided to shut down a plant in Gunsan and has hinted it would not shy away from more such drastic measures.

By Song Seung-hyun (ssh@heraldcorp.com)