The state-run Korea Development Bank will review injecting fresh investment into ailing GM Korea after examining the viability of its profit structure, its chief said Thursday.
Chairman Lee Dong-gull of the KDB told reporters that he had made a “verbal commitment” to the President of GM International Barry Engle that he would consider making fresh investment into the US carmaker’s local unit on the condition of the company presenting a self-rescue plan.
But regarding the carmaker’s request to handle GM Korea’s piling debts, Lee ruled out KDB’s support.
KDB Chairman Lee Dong-gull attends a press conference in Seoul on Thursday. (Yonhap)
“For old money, we cannot spend a dime. The GM head office is completely responsible for the old money. (The talks) began under the principle that the major shareholder is accountable for the debt,” he said at a press conference held at its head office in Seoul. “Old money” refers to the 3 trillion won ($2.79 billion) worth of debt borrowed to GM Korea by its parent company, GM.
Lee has met Engle three times so far as the US carmaker requested for cash matching its shares to resuscitate its loss-making business in Korea. The KDB is the second-largest shareholder of the US carmaker’s local unit, with a 17 percent share.
KDB and GM have agreed to conduct due diligence amid suspicions that GM has “intentionally” inflated its deficit by selling complete knockdown vehicles manufactured in Korea at a lower price to other GM units.
GM also left its Korean unit with an extensive amount of R&D expenses while applying interest rates higher than the market rate to its affiliate, say its labor and politicians.
But GM Korea has not yet submitted “highly sensitive documents,” according to Lee, thereby delaying a third-party study on the carmaker’s operations here. Local accounting firm Samil PricewaterhouseCoopers has been assigned to handle the case.
“We are not trying to dig into the mistakes of the past, but are trying to look into its cost structure before making a judgment on whether GM Korea can survive if it implements a self-rescue plan,” he said.
The comments came amid the deepening GM debacle, with the labor demanding the carmaker withdraw its plan of shutting down its plant in Gunsan, North Jeolla Province, and the government facing a dilemma of injecting taxpayers’ money to save thousands of jobs at a critical time when the general election is set to take place in less than three months.
Also, GM’s plan of allocating new car production has not been decided yet, raising skepticism from the government and the general public on its motive for requesting cash aid. The allocation of vehicle production is vital for GM Korea’s survival as it extends at least five years of operations here.
Engle said GM could allocate production of one sport utility vehicle and one crossover utility vehicle to GM Korea, on the condition of the government’s support. But the company has not finalized such a plan yet.
Meanwhile, GM Korea said Engle returned to Seoul on Wednesday to seek follow-up measures on his previous discussion with government officials and KDB executives. The company declined to comment on the details of his visit.
By Cho Chung-un (firstname.lastname@example.org