In the first bout of good news for GM Korea, the entity may have a funding deal in the works with the state-owned Korean Development Bank.
Reuters reported on Tuesday that the KDB may sign a preliminary funding deal with GM Korea on April 27 as it continues its due diligence. The preliminary deal will also depend on interim findings during the process as the KDB ensures everything looks relatively positive. KDB holds a 17 percent stake in GM Korea.
The funds could tally $468 million as part of KDB’s co-investment with General Motors’ proposed $2.8 billion investment over 10 years. The investment would bring new vehicle and engine production to GM Korea.
However, the deal will still rely on concessions from the auto union in South Korea. The union has until Friday to work out a deal with GM to cut costs in a restructuring process. Thus far, the union hasn’t budged aside from agreeing to no pay increases this year.
If the union and GM reach an agreement, KDB and GM Korea could sign a formal agreement next month. If they don’t, GM Korea will likely file for bankruptcy. The automaker also faces unfavorable public opinion. Locals have noted the automaker’s tendency to exit a market after government incentives run dry. Notably, GM pulled manufacturing from Australia’s Holden subsidiary as costs ran too high.
“What GM really needs to know is that anti-GM sentiment is very strong in South Korea. I told GM that they need to make me feel comfortable before I can make some kind of decisions,” KDB Chairman and CEO Lee Dong-gull said.