State-run bank to review U.S. carmaker’s plan to reduce Korean output
Published : 2013-12-09 20:08
Updated : 2013-12-09 20:08
The state-run Korea Development Bank, the second-largest shareholder of GM Korea, said Monday that it had asked the Detroit-based carmaker to submit additional financial data that supports its recent decision to pull its Chevrolet brand out of Europe.
Following GM’s withdrawal announcement Thursday, concerns are growing in Korea that the move would lead to large-scale restructuring at its Korean unit, which manufactures 90 percent of the Chevy cars sold in Europe.
“The decision on the Chevy pullout is totally up to GM management,” said a KDB official. “We are considering taking possible action, which we can do as the second-largest shareholder of GM Korea.”
According to industry sources, GM had earlier provided related data to KDB before its planned directors’ meeting on the Europe shake-up. But the bank requested additional documents saying the first batch was insufficient, the sources said.
As GM has decided to pull the Chevy brand out of Europe from 2016, its Korean factories are likely to be hit hard by a production cut, possibly about 20 percent from the current level, industry watchers say.
GM Korea shipped 187,000 Chevy cars to Europe last year, but reduced output this year at its factory in Gunsan, North Jeolla Province, due to sluggish European demand.
Industry watchers predict that the cutback would reduce Korean production from 800,000 vehicles this year to 650,000 vehicles in 2015.
In the reduction process, however, KDB is expected to exert limited influence. Its 17.02 percent state at GM Korea allows the bank to hold the right to veto decisions made on the Korean board only, but it holds no voting rights.
Of the 10-member directors’ committee, three are from KDB, while the seven others are from GM.
But the bank still seems willing to look into the situation more closely as a major shareholder, as the Europe decision will unavoidably affect GM Korea’s operation as well.
“There would be clear limits but we need to raise questions if any damage is made by their mismanagement,” said the KDB official.
The Korean unit firmly denied repeated speculation of GM’s possible pullout from Korea, saying the Europe shake-up would also help it remain competitive in Korea.