General Motors Co. has offered to extend loans maturing in February by one month without taking its South Korean plants as collateral amid ongoing talks with the South Korean government on its future operations in the country, industry sources said Friday.
In a board meeting attended by seven directors from GM Korea Co. and three from the state-run Korea Development Bank (KDB), GM expressed its intent to postpone asking for the repayment of 700 billion won (US$650 million) for loans it extended to its South Korean unit, a person with direct knowledge of the matter told Yonhap News Agency while declining to be named.
The meeting comes as part of joint effort by the Seoul government and the U.S. carmaker to turn GM's loss-making local unit around.
Last week, GM announced it will shut one of its four car assembly plants in Gunsan, about 270 kilometers south of Seoul, due to a low utilization rate of 20 percent. It also said it would decide on the fate of the remaining plants within weeks.
The Detroit carmaker asked the Seoul government to extend a financial helping hand to the unit but Seoul demanded that GM first come up with a concrete investment plan for its continuing business presence here. It also demanded that GM Korea's union share the burden to stay afloat. The carmaker has hinted that it will ask employees to accept a freeze in wages and reduced bonuses and welfare benefits.
If Seoul decides to help GM Korea with loans and investments, GM said it will consider allocating two new vehicles to its Korean plants to maintain a capacity of 500,000 units a year. Further details were not available from either side, as the talks are being held at closed meetings.
In a meeting held at GM Korea's main Bupyeong plant, just west of Seoul, GM said due diligence will be carried out on its operations so all sides can get a better picture of the situation facing the carmaker.
The KDB reportedly called on GM Korea to ask its parent firm to lower the interest rates set for the debt, as they run at a high 4.8 percent to 5.3 percent.
GM Korea and the KDB declined to comment on the matter.
GM Korea's board of directors has to hold a further meeting to officially decide on the extension of the maturing debt, an insider said.
The U.S. company recovered debts worth about 400 billion won from its Korean operations at the end of last year out of overall maturing debts valued at 1.13 trillion won. The maturity of the remaining 720 billion won debt has been extended to the end of February, according to local media reports. The company didn't confirm the figures.
The KDB owns a 17 percent stake in GM Korea, with GM and SAIC Motor Corp Inc. controlling 77 percent and six percent, respectively.
In 2017, GM Korea produced a total of 520,000 vehicles at its car assembly plants, which have a combined capacity of 910,000 units. It sold a total of 524,547 vehicles last year, down 12 percent from a year earlier.
Meanwhile, the KDB's labor union said in a statement that the policy lender should not extend a single won to GM given what the U.S. carmaker has done to its Korean unit over the past 15 years.
"GM is putting pressure on the Korean government for its own interest, seeking financial help by holding the jobs at its Korean plants hostage. GM should present an effective plan for the job security (of GM Korea workers) and a long-term commitment to staying in the country," it said. (Yonhap)
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