General Motors (GM) has proposed an investment of $2.8 billion into its loss-making South Korean operations over the next 10 years and has asked Seoul to provide its share of the funds, a South Korean government official said.
The U.S. automaker announced it would shut down a factory in Gunsan, southwest of Seoul, and that it was mulling the fate of its three remaining plants in South Korea.
GM owns 77 percent of its South Korean unit GM Korea, while state-run Korea Development Bank (KDB) owns a 17 percent stake. GM’s main Chinese partner, SAIC Motor Corp Ltd, controls the remaining 6.0 percent.
The official, who had direct knowledge of the matter, said GM had asked South Korea to inject funds into GM Korea through KDB. On the basis of its shareholding, KDB would provide around $476 million in investment.
The $2.8 billion investment proposal is separate from a roughly $2.7 billion debt-for-equity swap GM is offering to get financial support and tax benefits from Seoul, the official and a lawmaker said. Reuters first reported the details of that part of the plan.
A GM Korea spokeswoman said she cannot confirm details of the investment.
South Korea’s trade minister, Paik Un-gyu, told parliament on Wednesday the government had first asked for an audit into GM’s “opaque” operations in the country, which directly employ some 16,000 workers.
“By opaque we mean the high cost of goods, interest payments regarding loans and unfair financial support made to GM’s headquarters,” the minister said.
Paik said the South Korean government needed reassurance from GM on its long-term commitment to the country before it can commit funds.