South Korea's commerce minister on Wednesday called on General Motors Co. to submit a feasible long-term investment plan and improve its opaque management style to restructure its operations here following its decision to shutter one of its car production plants.
The Detroit-based automaker said last week that its Gunsan factory in the southwest will be closed by May, citing its low output. The decision unnerved policymakers because such a step could lead to massive layoffs that would not be in tune with President Moon Jae-in's main goal of creating good jobs.
The carmaker has stated that it will decide on the future of the remaining three plants in South Korea within weeks based on discussions with the Seoul government and GM Korea's labor union.
Paik Un-gyu, Korean minister of trade, industry and energy, speaks during a parliamentary meeting on Feb. 21, 2018. (Yonhap)
Minister Paik Un-gyu said in a meeting with lawmakers that the government will decide on support plans after looking into GM Korea's financial situation and long-term business plan.
"We think GM Korea's management is opaque in many ways, including the high ratio of sales prices to raw material costs, interest payment in its debt and unfair financial support for GM headquarters," the minister of trade, industry and energy said during a parliamentary committee. "Ahead of the new investment, the government will make it a priority of auditing (GM's business practices) in an objective and transparent matter."
The state-run Korea Development Bank, which owns a 17 percent stake in GM Korea, is consulting with company executives for an audit before deciding on its funding plan, according to industry sources.
"I wish KDB would have taken a more proactive approach (ahead of GM's decision)," Paik said. "But I also have suspicions that GM has intentionally banned access to its detailed business strategies and corporate data during meetings of shareholders, saying they are trade secrets."
While working-level talks are currently underway, GM Executive Vice President Barry Engle met with Lee Dong-gull, the head of KDB, over the company's detailed restructuring proposal.
The two sides are known to have agreed to launch an audit on the firm once the working groups' talks wrap up. They are still discussing to what extent the inspection should be carried out.
Industry watchers expect the audit to begin at the end of this month or early next month at the latest.
Engle is also scheduled to meet with Deputy Trade Minister Lee In-ho on Thursday.
GM has offered to convert $2.7 billion in debt owed by its South Korean operation into equity in exchange for financial support and tax benefits from Seoul, Rep. Hong Young-pyo from the ruling Democratic Party said Tuesday after meeting with Engle.
GM has proposed a new $2.8 billion investment plan for its South Korean businesses for the next 10 years, while moving to secure a production capacity of 500,000 vehicles for its local plants, Hong said. This would require the carmaker to allocate at least two new models to be produced in the country.
Last year, GM Korea produced a total of 520,000 vehicles at all its car assembly plants in Asia's fourth-largest economy, which have a combined capacity of 910,000 units.