Final Deal Nearly in Place for Rescue of GM Korea
With bankruptcy off the table, General Motors and the South Korean government are finalizing the details of a rescue deal for the struggling GM Korea unit.
The deal could be signed as soon as Friday. As part of it, Korean officials say GM has agreed to stay in the country for at least 10 more years. The automaker will also locate its Asia-Pacific headquarters, excluding Chinese operations, in South Korea.
GM will have to hang on to its 77% stake in GM Korea for at least another five years, and that share can’t fall below 35% until 2028.
Even though the deal keeps GM in South Korea for a decade, Finance Minister Kim Dong-yeon said it also sets the stage for the automaker to stay in the country “continuously beyond 10 years.”
Last month, GM Korea’s union agreed to a pay freeze, benefit cuts, and no 2018 bonuses in a deal that helped avert bankruptcy.
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GM and South Korea’s state-run bank have already agreed on $7.15 billion in investments to help GM Korea survive.
Under the deal, GM’s overseas operations will also purchase a larger portion of their parts from South Korean suppliers. South Korea will fund GM’s local suppliers and other automakers as they develop parts for electric and self-driving vehicles.
GM Korea lost more than $1 billion in 2017. The unit has struggled because of slowing sales, a lessening demand for small cars, and the closure of several key export markets. It has already announced plans to close its Gunsan plant, one of four in the country.
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News Source: Reuters