Due diligence on GM Korea set to begin later this week

Published : Feb 25, 2018 - 09:23 Updated : Feb 25, 2018 - 09:23

The state-run Korea Development Bank will begin its due diligence on GM Korea Co., the South Korean unit of General Motors Co., later this week after the US carmaker demanded financial support from its second-largest stakeholder, government officials said Sunday.

Last week, GM and the Seoul government began talks to discuss ways to turn its loss-making unit, GM Korea, around after the US.

carmaker announced its plan to shut one of its four car assembly plants in the country by May. GM also said it would decide on the fate the remaining plants within weeks.

Samil PricewaterhouseCoopers will carry out the due diligence on GM Korea on behalf of the KDB and will aim to finish the process by the end of April, the state lender said.

(Yonhap)

The accounting firm will take a closer look into GM Korea's financial statements amid speculation that GM has extended loans at high rates to its Korean unit, bought Korean-made Chevrolet vehicles at low prices and made GM Korea send a certain amount of R&D costs to its parent each year.

After reviewing the due diligence's results, the KDB plans to decide on whether to make an investment in GM Korea and how much taxpayer money can be injected into the company.

The Detroit carmaker has recently offered to extend loans maturing at the end of February by one month to the end of March without taking its main Bupyeong plant, just west of Seoul, as collateral.

If Seoul decides to help GM Korea with loans and investments, GM said it will consider allocating two new vehicles to its Korean plants to maintain a capacity of 500,000 units a year.

The KDB owns a 17 percent stake in GM Korea, with GM and SAIC Motor Corp Inc. controlling 77 percent and six percent, respectively.

In 2017, GM Korea produced 520,000 vehicles at its car assembly plants, which have a combined capacity of 910,000 units. It sold 524,547 vehicles last year, down 12 percent from a year earlier. (Yonhap)