Following near bankruptcy and a last-minute deal to save the unit, GM Korea lives on. The entity will now issue $804 million worth of preferred stock, Reuters reported on Tuesday.
Preferred stock takes priority over common stock and often have a dividend that must be paid out before dividends to common shareholders. The stock often does not carry voting rights, either.
Preferred stockholders normally receive priority to a company’s assets in the event a company liquidates as well.
GM Korea survived waves of negotiations with the state-owned Korea Development Bank and the local auto union. Ultimately, the union agreed to massive concessions and the KDB agreed to co-invest alongside parent company, General Motors. Between GM and the KDB, GM Korea received a $7 billion bailout.
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.
Not included in the final bailout agreement was a plan to save the Gunsan plant. The manufacturing facility is still scheduled to close.
Comment
1997~2018.
Rest in peace.
Gunsan Plant of GM Korea, former Daewoo Motors.
Suffered by horrifying streagy of GM Global and GMK, warlike labour union members, and awful mixture of destructive management and unions.
GM could have done better about GMK if they kept their harmonic streagy of early 2000s, which once helped utilising strong unions of Korea well. But instead they decided choose ruining almost every market where GMK had been, and stimulating that same uncompromising union, thus making tons of losses.
Just hope GM Global learn something important lesson from a chaotic, and very recent decade. Give them proper markets and products to work, take a streagy to utilize suppliers, unions, office and sales employees, manufacturers and developers properly, and earn decent profit GM itself really want.