Navigation

S. Korea, GM agree on bailout for local unit

The Associated Press

A worker at General Motors Korea walks outside the factory in Bupyeong, South Korea, last month.

The Associated Press SEOUL (AP) — South Korea said Thursday that it has reached an agreement with General Motors to inject $4.35 billion in funding and other measures to turn around the loss-making Korean unit.

Finance Minister Kim Dong Yeon told reporters that the American automaker agreed to other measures meant to ensure the company stays in South Korea for at least 10 years. GM will be restricted from selling any shares for the next five years and obligated to retain at least a 35-percent stake in its Korean unit for the following five years.

South Korea can also veto a sale by GM of 20 percent or more of its assets during the next decade, effectively blocking any withdrawal during that time.

GM’s restructuring plans include a shutdown of one of its four plants in South Korea and reducing its workforce by nearly 3,000. They stoked worries that GM Korea, the country’s third-largest carmaker and provider of more than 150,000 jobs, may permanently close.

Kim said the latest measures should ensure GM’s long-term presence.

“We have laid out the foundation for GM to continue to do businesses beyond 10 years in a win-win situation for both the South Korean economy and GM,” he said.

Under the deal, the state-controlled Korea Development Bank, GM Korea’s second-largest shareholder with a 17-percent stake, will inject $750 million while GM will provide $3.6 billion in fresh loans for capital spending for the next 10 years. GM will also convert its Korean unit’s debt of $2.8 billion into equity, helping it save on interest fees.

Speech

Click to play

0:00/-:--

+ -

Generating speech. Please wait...

Become a Premium Member to use this service.

Become a Premium Member to use this service.

Offline error: please try again.