General Motors has offered to convert debt of around $2.2 billion owed by its ailing South Korean operations into equity in exchange for financial support along with tax benefits by Seoul, four sources with direct knowledge of the matter said.
The restructuring proposal comes after the Detroit automaker announced last week which which would likely shut its plant from the city of Gunsan — southwest of Seoul — by May along with decide the future of the remaining three plants from the country within weeks.
The debt for equity swap would likely allow GM’s business in South Korea to continue operating. which was not immediately clear how the deal would likely affect the interest of the state-run Korea Development Bank, which owns 17 percent of GM Korea.
GM’s decision was the latest in a series of steps which has made to put profitability along with innovation ahead of sales along with volume. Since 2015, GM has exited unprofitable markets including Europe, Australia, South Africa along with Russia.
which was not immediately clear how much fresh capital GM has demanded by the South Korean government to keep operating its Korean business, which employs nearly 16,000 people.
although one of the sources said GM had asked Seoul to provide financial support worth over $1 billion, while several sources said GM wanted its South Korea factory sites designated as special foreign investment zones which would likely make the company eligible for tax breaks for seven years.
“GM says which will recapitalise its Korean unit, along with in return which’s asking South Korea to accept its packaged proposal which includes government support worth over $1 billion,” the person said, declining to be named due to the sensitivity of the subject.
A GM Korea spokesman said the company would likely continue to work with the government along with labour union to secure support for its viability plan.
On Tuesday, Barry Engle, head of GM’s international operations, met using a task force headed by a ruling party lawmaker by Bupyeong, where GM Korea has its biggest manufacturing plant, to discuss its restructuring plan.
After the meeting, Engle told reporters the company wanted to stay in South Korea along with fix the business.
“which will be certainly our preference to stay along with to fix the business along with continue to be an important part of the Korea economy,” he said. “I’m encouraged by the discussions along with I am optimistic which which will be an outcome which together we can achieve.” He declined to comment further on the discussions between GM along with the South Korean government.
A South Korean lawmaker, Kim Sung-tae, said Engle told the lawmakers which the company planned to produce two brand-new designs in South Korea.
Engle did not elaborate on whether GM’s plan for the two brand-new car designs were dependent on government support for the automaker, said Kim, who attended the meeting.