After years of turmoil, GM Korea will get a fresh start. Parent automaker General Motors and South Korea have agreed to a $7 billion bailout package, which sees both sides co-investing in the local unit.
The Economic Times reported on Thursday that GM itself will provide $6.4 billion in funding for the unit, while the state-owned Korean Development Bank (KDB) will provide $750 million. The deal follows a union agreement to freeze wages, cut bonuses and slash benefits for the GM Korea workforce.
In addition to the bailout funds, GM will also invest $2 billion over the next 10 years and another $1.6 billion for corporate restructuring and operations. As promised in the past, GM will also conduct a debt-to-equity swap totaling $2.2 billion. The move will save GM Korea $110 million in interest payments a year.
On the news, South Korea finance minister, Kim Dong-yeon, said, “We hope that GM Korea carries out this bailout package faithfully so that it may become a success story.”
GM Korea neared bankruptcy last month after prolonged discussions with the local union. Without concessions from the union, the unit was to file for bankruptcy protection as it ran out of money to pay its debts. The entire series of events began after GM announced plans to shutter the GM Gunsan plant last month. The move will leave 2,000 workers without a job, though GM agreed to work with the union to find new work for the affected employees.
Comments
Great to see the South Korean government facing reality and bailing out their mess with Korean taxpayer dollars. GM won this one.
Even greater to see our President rescuing 3 American hostages today from North Korea and Lil’ Kim agreeing to a Peace Summit with President Trump on June 12th in Singapore. Remember when the fake news was trying to scare us by saying the President was going to start WW3 with NK? Yup, sure, okay…
Can I give you a question about it; will they stay at South Korea more than ten years? I think it is an important point that would let government allow give suppliers, labours, dealers, developers, and customers a great degree of trustworthiness.
As government and GM agreed to GM should stay in Korea at least in 10 years, there is still a threat of attempting to withdraw from South Korea when ten years were already passed. To ensure everyone that they can trust GM again, GM need to give them a sustainable vision, which indicates that GM Korea would maintain sustainable conditions after overpassing ten years.
Unions suck, except when they realise they could destroy the very thing that gives them jobs and supports their families! Then and only then does a degree of intellect creep in.
The days of militant union tactics died with the end of the 20th Century.
gm close because trump policy or its because they have real problem
GM Korea would profit a lot — as other South Korean industries — from a better market access in Russia and Europe enabled by a relaunch of the rail link from South Korea via Pyeongyang, Sinŭiju/Dandong ( a new faster line between Pyeongyang and Sinŭiju is under construction), to Harbin and then in Manzhouli/Zabaykalsk changing to the wider gauge Russian Transsiberian Railway in direction of Western Russia and Europe. Faster than the sea route per ship, and cheaper than air transport.