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.