The South Korean government and General Motors Co. reached an agreement Thursday to spend 7.7 trillion won (US$7.16 billion) on keeping the troubled South Korean unit of the USA carmaker afloat.
Earlier this year, GM Korea announced a plan to shut down Gunsan, one of its four plants in the country, and lay off some 2,000 personnel, sparking a prolonged strike and negotiations with the authorities. GM will be restricted from selling any shares for the next five years and obligated to retain at least a 35-percent stake in its Korean unit for the following five years.
"If GM Korea fails to turn around, 150,000 jobs will be threatened and some 3,000 suppliers will be in difficulties", he added.More news: Gov. Mary Fallin Vetoes Constitutional Carry Bill
Under a preliminary contract, GM may even buy more parts out of Southern Korean suppliers to get its worldwide operations, fostering procurement from around 2 trillion won (£1.85 billion) annually at the moment, the market ministry said in an announcement.
Kim said the latest measures should ensure GM's long-term presence.
This followed a more subdued outlook for the troubled unit from the state-run Korea Development Bank (KDB), which said on Friday the unit should swing to a profit from 2022 on the back of cuts in labor costs. GM will also convert its Korean units debt of $2.8 billion into equity, helping it save on interest fees.More news: Brazil confirm Dani Alves will miss World Cup due to knee injury
In return, South Korea will provide financing to regional suppliers of GM and additional European Korean auto makers such as the growth of pieces for electric and also self-driving automobiles, and also additional crucial automotive components.
"GM will newly establish an Asia-Pacific HQ in Korea and push for making GM Korea the hub for manufacturing, sales and technology development", the ministry said in a release, without elaborating on the specific schedule or the size of the new office. The automaker has also announced strategies to close one of its four South Korean plants, cut headcount by almost 3,000 and has reached a deal on wages with its employees.
But production has fallen from 940,000 cars in 2007 to 520,000 previous year, when GM Korea lost some US$139 million in South Korea.More news: Philippine Supreme Court justices oust chief justice