The Korea Development Bank (KDB), the second-biggest shareholder in GM Korea Co., said on Dec. 18, 2018 it has accepted the carmaker's plan to set up a separate R&D company in a reversal from the state lender's opposition to the plan.
Early in the day, General Motors Co. (GM) and the KDB, which control 77 percent and 17 percent of GM Korea, respectively, reached an agreement on the establishment of GM Technical Center Korea, Ltd.
GM Korea also held a shareholders meeting to approve the plan.
In a briefing to reporters, KDB Chairman Lee Dong-gull said, "We found no reasons to stand against the new R&D entity plan as it will help promote R&D activities at GM Korea and have a positive impact on the carmaker's manufacturing operations."
But the KDB chief didn't elaborate on what the positive impact will be.
Lee said if GM Korea's R&D separation proposal is nullified, GM's 10-year plan to revive its money-losing South Korean unit will also be affected.
The state lender plans to drop an injunction filed against the R&D separation plan in October as well, he added.
The new stand-alone R&D center will lead the global engineering for two vehicle programs allocated to GM Korea's manufacturing operations in May -- an all-new subcompact sport utility vehicle and all-new cross utility vehicle-type model -- as part of the company's viability plan, GM Korea said in a statement.
"Now it is critical that all stakeholders do everything they can to deliver these important programs -- and also to support turning around the financial performance of our operations, to be sustainable and profitable for the long term," GM Executive Vice President Barry Engle said in the statement.
In response to the agreement between GM and the KDB, GM Korea's union said it will take actions in opposition to the scheme.
"We will stage an eight-hour strike on Wednesday and will consider holding additional strikes," a union spokesman said over the phone.
GM Korea workers have strongly opposed the plan as they see it as a step by the Detroit carmaker to scale down its production facilities here in the long term.
Last week, the KDB said it will complete its injection of US$750 million into GM Korea later this month as part of the rescue package signed in May. In the same month, GM shut down one of its four car assembly plants in Korea due to a low utilization rate.
Under the package, the KDB pledged to inject $750 million, while GM agreed to provide $3.6 billion in fresh loans to keep GM Korea afloat.
In the 2014-2017 period, GM Korea posted 3.13 trillion won in accumulated net losses due to a lack of new models and weak sales.
In June, the KDB injected $375 million into GM Korea, but the bank had said the remaining half may not be provided amid speculation that GM may keep only its research facility in Korea and eventually shut down its manufacturing facilities here.
The remainder will be provided to GM Korea on Dec. 26, the KDB said.
The May agreement prohibits GM from selling any stake in GM Korea over the next five years and limits GM's right to sell shares or assets in GM Korea for 10 years. (Yonhap)