GM hints at withdrawing debt-for-equity swap plan for Korean unit
[THE INVESTOR] US automobile giant General Motors hinted at possible willingness to withdraw the planned debt-for-equity swap for GM Korea in an apparent bid to induce the state creditor to pump more cash into the financially-troubled South Korean unit, industry sources said on April 15.
According to the sources, GM Executive Vice President Barry Engle met officials from the Korea Development Bank (KDB), the second-biggest shareholder, on April 13, and suggested a plan for the US headquarters to give loans to GM Korea, while the bank makes an investment.
The suggestion runs counter to GM's previous proposal. The company suggested a US$2.7 billion debt-for-equity swap and US$2.8 billion in investment over the next 10 years in return for financial aid through the KDB.
GM also claimed that GM Korea may file for court receivership on April 20 this week if it fails to reach an agreement with the labor union.
The US automobile giant said earlier it wishes to continue business in South Korean when closing down the Gunsan factory in February, revealing the debt-for-equity swap and investment plans.
Industry watchers, however, said GM is presumed to have shifted its stance recently to seek court receivership amid prolonged negotiations with the labor union and the KDB's investigation of GM Korea.
Accordingly, sources said GM may eventually shut down all production facilities in South Korea and relocate that production to China, leaving only research, design, and sales divisions here.
The potential exit of GM from the South Korean market is expected to adversely affect the country's automobile industry, as nearly half of GM Korea's 301 tier-one suppliers here depend on the company for more than 50 percent of their earnings. Up to 500,000 jobs are could be affected by the exit of GM Korea from the country, when considering other smaller subcontractors.
By Song Seung-hyun and newswires (firstname.lastname@example.org)