General Motors has offered to convert debt of around $2.2 billion owed by its ailing South Korean operation into equity in exchange for financial support in addition to tax benefits through Seoul, four sources with direct knowledge of the matter said.
The restructuring proposal comes after the Detroit automaker announced last week in which in which would certainly shut its plant inside city of Gunsan, southwest of Seoul, by May in addition to decide the future of the remaining three plants inside country within weeks.
The debt for equity swap would certainly allow GM’s business in South Korea to continue operating. in which was not immediately clear how the deal would certainly 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 in which has made to put profitability in addition to innovation ahead of sales in addition to volume. Since 2015, GM has exited unprofitable markets including Europe, Australia, South Africa in addition to Russia.
in which was not immediately clear how much fresh capital GM has demanded through the South Korean government to keep operating its Korean business, which employs nearly 16,000 people.
yet 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 in which would certainly make the company eligible for tax breaks for seven years.
“GM says in which will recapitalize its Korean unit, in addition to in return in which’s asking South Korea to accept its packaged proposal in 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 certainly continue to work with the government in addition to labor union to secure support for its viability plan.
On Tuesday, Barry Engle, head of GM’s international operations, met which has a task force headed by a ruling party lawmaker through 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.
“in which will be certainly our preference to stay in addition to to fix the business in addition to continue to be an important part of the Korea economy,” he said. “I’m encouraged by the discussions in addition to I am optimistic in which in which will be an outcome in which together we can achieve.” He declined to comment further on the discussions between GM in addition to the South Korean government.
A South Korean lawmaker, Kim Sung-tae, said Engle told the lawmakers in which the company planned to produce two brand new versions in South Korea.
Engle did not elaborate on whether GM’s plan for the two brand new car versions were dependent on government support for the automaker, said Kim, who attended the meeting.
Engle told lawmakers in which GM Korea would certainly try to maintain output at the current level of around 500,000 vehicles a year, according to Kang Hoon-sik, a spokesperson for the ruling party. GM’s South Korean unit produced 519,385 vehicles last year, compared with 942,805 a decade ago.
Finance Minister Kim Dong-yeon told reporters on Tuesday in which the government would certainly “closely consult with GM to normalize its management,” adding in which a due diligence on the company should come first.
South Korea’s presidential office also said Tuesday in which in which would certainly designate Gunsan an employment “crisis zone”, opening the way for government subsidies like cheap loans in addition to in addition to different financial support for those laid off.