After nearing bankruptcy, GM Korea will live on. Preliminary details on the unit’s bailout agreement have surfaced, with General Motors and South Korea pledging to inject $4.35 billion into the business, Reuters reported on Thursday.
GM and the local auto union reached a tentative agreement on concessions this past Monday, which the union voted in favor of on Thursday. With the union onboard, the state-run Korean Development Bank signed a tentative deal to co-invest alongside GM. The KDB will provide $750 million to GM Korea. Meanwhile, GM will invest the other $3.6 billion. Another $2.8 billion will be converted from debt to equity.
Part of the deal gives the KDB, which owns 17 percent of GM Korea, a veto power that can block the automaker’s sale of more than 20 percent of its assets, the report added.
GM plans to bring new vehicle and engine production to South Korea with the new deal set in place. However, the Gunsan plant will still close its doors this May—the major sticking point for the local auto union. But, GM agreed to encourage more of the Gunsan workforce to take buyout packages and potentially place them in new positions at other production sites. The union also agreed to wage freezes no bonuses and benefit cuts to keep labor costs in check.