GM, South Korea weigh raising investment plan in unit from $2.8 billion: source
SEOUL (Reuters) - General Motors (GM.N) and South Korea are considering increasing the size of their investment in the U.S. automaker’s local unit from a previously proposed $2.8 billion, a senior government source with direct knowledge of the matter said on Wednesday.
An employee works at an assembly line of GM Korea's Bupyeong plant in Incheon, South Korea March 29, 2018. REUTERS/Kim Hong-Ji
GM Korea averted bankruptcy on Monday after striking a last-minute wage deal with its labor union. The U.S. automaker has been in talks with the South Korean government on providing financial support, and a preliminary deal on the assistance is likely to be signed on Friday.
GM had said it would fund its “portion of the $2.8 billion investment”, paving the way for two new sport utility vehicles to be built in South Korea. The investment was to be over a 10-year period and was conditional to the company winning union concessions and getting government financial support.
State-run Korea Development Bank (KDB) previously said it may offer about 500 billion won ($468.4 million), proportional to its 17 percent stake in GM Korea, to help fund GM’s investment in the unit.
FILE PHOTO: The logo of GM Korea is seen at its Bupyeong plant in Incheon, South Korea March 29, 2018. REUTERS/Kim Hong-Ji/File Photo
“GM has expressed its intention to increase the size of new money injection from its previous plan to normalize management, and asked the KDB to expand its funding proportional to its stake,” the source told Reuters, requesting anonymity as the matter was confidential.
He declined to comment on the size of the investment.
South Korean online media MoneyToday reported on Wednesday that GM said it would expand the investment to more than 4 trillion won, meaning that KDB’s spending would also rise to 700 billion won.
GM and KDB declined to comment.
GM shocked South Korea in February when it unveiled a major restructuring plan for the money-losing unit, involving shuttering one of its four plants in the country and voluntary redundancies for 2,600 workers.
On Wednesday GM Korea started receiving applications for a fresh voluntary redundancy program targeted at mainly the remaining 680 workers at the Gunsan factory which faces closure by May.
The automaker had earlier said it would file for bankruptcy protection should it fail to gain concessions from the union by its extended deadline of Monday evening.
An hour before the deadline expired, the union reached a preliminary deal to freeze base wages, skip bonuses this year and trim benefits, subject to a vote by its members on Wednesday and Thursday.