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March 29, 2024

Moon reviews GM plant shutdown debacle

PUBLISHED : February 22, 2018 - 18:11

UPDATED : February 23, 2018 - 10:26

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[THE INVESTOR] As the government sat down with a General Motors representative at an undisclosed venue for a negotiation on Feb. 22, the deputy prime minister for the economy brought up the issue as a main agenda item for President Moon Jae-in, citing grave repercussions to the local economy.

Moon and Deputy Prime Minister and Finance Minister Kim Dong-yeon discussed how to minimize the effect of GM Korea closing its Gunsan plant, amid growing resistance from workers there. 


The presidential office of Cheong Wa Dae.



Moon had said on Feb. 19, “Gunsan’s regional economy is expected to be hit hard by the closure decision,” calling for the formation of a pan-government task force to revitalize the local economy and special measures to keep the local economy alive.

Kim also reported to the president what GM had proposed a day before, of an investment of US$2.8 billion into its loss-making Korean operations over the next 10 years along with the Seoul government’s pledge to share the burden.

On Feb.18, GM International President Barry Engle met with Korea Development Bank Chairman Lee Dong-gul during which they reportedly agreed on an outline for conditions for subsidies.

On Feb. 22, Engle separately met with Vice Minister of Trade, Industry and Energy Lee In-ho and First Vice Minister of Finance Ko Hyoung-kwon.

GM has reportedly asked the government to approve GM’s plans in Korea as the loans GM Korea owes to GM, worth US$580 million, expire at the end of this month. It also asked for the KDB to take part in converting debt worth US$2.7 billion into equity corresponding to the bank’s 17 percent share. In addition, it sought KDB’s participation in its new facility and other investment plans worth $2.8 billion, as well as tax benefits and subsidies by designating new special foreign investment zones.

Based on these demands, the Seoul government’s funds for GM would amount to some 1.7 trillion won.

In return, GM would put into motion the debt-to-equity swaps and investments, while also restructuring the existing plants.

“GM’s decision to make the US$2.8 billion investment is highly rated but the request for KDB to participate in the capital increase is likely to be turned down because the government has no reason to be responsible for GM Korea’s poor management,” said a government official anonymously.

In return for the government support, KDB also call on GM to make a long-term plan to normalize the management, disclosing financial statements and lower the interest rate on loans for GM Korea.

A public poll showed that more than half of the public would approve of the government support to GM Korea only if GM unveiled an appropriate plan to normalize management.

The survey was done on 500 adults in Korea nationwide on Feb. 21 by a local research firm Realmeter.

Just over 55 percent of the respondents said the government should support GM Korea on such a condition. About 30 percent of them said taxpayers’ money should not be used to support foreign companies, and 6.4 percent responded the government should support the firm unconditionally to prevent massive unemployment.

By Shin Ji-hye/The Korea Herald (shinjh@heraldcorp.com)

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