Korea Development Bank, the second-largest shareholder of GM Korea, is likely to start due diligence on the US carmaker’s financial records later this week, amid intensifying concerns over the fate of the fourth-largest carmaker here.
The state-run bank and GM are in last-minute negotiations before the review of the records, with KDB demanding legally binding access to corporate files. A local accounting firm, Samil PricewaterhouseCooper, will conduct the review of GM Korea’s accounts, on the agreed request of both parties. The results are likely to be disclosed as late as April, according to industry sources.
Depending on the results, the Korean government is likely to finalize its decision on whether to provide a subsidy to GM, as it faces the dilemma of supporting the US carmaker over growing criticism of wasting taxpayers’ money.
The future of GM’s operation here is also likely to face another critical decision in early March, as the US carmaker is set to make a decision on which new cars are to be allocated for its plants here.
Critics and labor have been blaming the misallocation of cars for GM Korea’s piling losses.
GM has continued to allocate small cars to its plants in Korea in recent years, even after demand for small cars declined while luxury sedans or large sport utility vehicles became popular on the back of low oil prices.
“GM Korea’s 7 percent market share here -- which is too small given GM’s product competitiveness -- is due to the lack of the development of cars that can satisfy customer needs,” said Kim Pil-soo, an automotive professor of Daelim University.
GM International President Barry Engle said last week it would produce a new sport utility vehicle in its Bupyeong plant and a crossover utility vehicle in its Changwon plant. But that is likely to change based on negotiations with the GM Korea union and government support.
GM also has to deal with local workers strongly resisting GM’s move to scale down its business here.
On Friday, GM Korea mapped out a plan to freeze wages and not to pay incentives this year. Workers strongly opposed the proposal, saying, “We cannot accept the responsibility made by the poor management. We will also never accept the unilateral decision of closing the Gunsan plant.”
The union also called for the government not to give a single penny to GM, which should support its Korean unit with its own money.
Apart from the new car and union issues, GM and the government should complete negotiations on how to deal with GM Korea’s outstanding loans of around 3 trillion won ($2.79 billion).
Last week, GM delayed the collection of 722 billion won set to expire at the end of this month and withdrew its demand for the Bupyeong plant to be offered as security.
However, another loan of 988 billion won is set to expire in April, and it is now uncertain whether GM will again delay the collection of the loans that are to expire in the coming months. Out of around 3 trillion won, at least 1.7 trillion won of loans will be due this year.
By Shin Ji-hye (
shinjh@heraldcorp.com)
