The state-run Korea Development Bank will review injecting fresh investment to ailing GM Korea after examining the viability of its profit structure, its chief said on March 8.
Chairman Lee Dong-gull of KDB told reporters that he has made a “verbal commitment” to Barry Engle, the president of GM International that he would consider making fresh investment to the US carmaker’s local unit on condition of the company presenting a self-rescue plan. But on the carmaker’s request to handle GM Korea’s piling debts, Lee ruled out KDB’s support.
“For old money, we cannot spend a dime. GM head office is completely responsible for the old money. (The talks) began under the principle that the major shareholder is accountable for the debt,” he said at a press conference held at its head office in Seoul. “Old money” refers to 3 trillion won worth of debt borrowed to GM Korea by its parent company, GM.
Lee met Engle three times so far as the US carmaker requested for cash matching its shares to resuscitate its loss-making business in Korea. KDB is the second-largest shareholder of the US carmaker’s local unit, with 17 percent of share.
KDB and GM have agreed to conduct due diligence amid suspicions that GM has “intentionally” inflated its deficit, by selling complete knockdown vehicles manufactured in Korea at a lower price to other GM units. GM also left its Korean unit with extensive amount of R&D expenses while applying interest rates higher than market to its affiliate, the labor and the politicians claimed.
But GM Korea has not yet submitted “highly sensitive documents,” according to Lee, thereby delaying a third-party study on the carmaker’s operations here. The local accounting firm, Samil PricewaterhouseCoopers is assigned to handle the case.
“We are not trying to dig into the mistakes of the past, but are trying to look into its cost structure before making a judgment whether GM Korea can survive if implementing a self-rescue plan,” he said.
The comments came amid a deepening GM debacle, with the labor demanding the carmaker to withdraw its plan of shutting down its plant in Gunsan and the government facing a dilemma of injecting taxpayers’ money to save thousands of jobs at a critical time when the general election is set in less than three months.
Also, GM’s plan of allocating new car productions have not been decided yet, raising skepticisms from the government and the general public on its motive of requesting cash aids. The allocation of vehicle production is vital for GM Korea’s survival as it extends at least five years of operations here.
Engle said GM could allocate production of one sports utility vehicle and one crossover utility vehicle to GM Korea, on condition of the government’s support. But the company has not finalized such a plan yet.
Meanwhile, GM Korea said Engle returned to Seoul on March 7 to seek followup measures on his previous discussion with the government officials and KDB executives. The company declined to comment on details of his visit.
By Cho Chung-un/The Korea Herald (email@example.com