General Motors has proposed $2.8 billion of fresh investment into its South Korean operations over the 10 years as part of its plan to restructure the embattled unit, a South Korean senior government official said on Wednesday.
The offer comes as the Detroit carmaker and the South Korean government discuss restructuring options at loss-making GM Korea, one of GM’s largest offshore operations.
The official with direct knowledge of the matter said GM had also asked South Korea to inject funds into GM Korea in which the country’s state bank also holds a stake. However, the official added that a close look into GM’s proposal was necessary to determine whether the investment plan was sufficient to rescue the unit, which directly employs some 16,000 workers.
“We need to have a closer look through the audit,” the official said.
South Korea’s trade minister said the government has also asked for an audit into GM’s “opaque” management in the country.
“By opaque we mean the high rate of profits to raw material costs, interest payments regarding loans and unfair financial support made to GM’s headquarters,” said Minister Paik Un-gyu told lawmakers in parliament.
Last week, the U.S. automaker announced it would shut down a factory in Gunsan, southwest of Seoul, and said it was mulling the fate of its three remaining plants in South Korea.
A South Korean lawmaker said earlier that GM had put forward a proposal including the investment plan and a debt to equity swap of the Korea unit’s borrowings to the parent company.
In return, GM requested South Korea to take part in financing the investment and raising capital, according to a statement by Jung You-sub, the lawmaker from Bupyeong where GM runs its biggest factory in South Korea.
Jung’s office was not immediately available for comment.
On Tuesday, Reuters reported GM had offered to convert debt of around $2.2 billion owed by its ailing South Korean operation into equity in exchange for financial support and tax benefits from Seoul, four sources with direct knowledge of the matter said.
