16th Ministerial Meeting on Industrial Restructuring
Government Discusses Agreements with GM
Deputy Prime Minister Kim Dong Yeon presided over the 16th Ministerial Meeting on Industrial Restructuring held on May 10, and discussed the agreements made with GM, as well as support for the local suppliers affected. Deputy Prime Minister Kim underlined the government’s three guiding principles behind the agreement: the responsibility of the largest shareholder, sharing of the burden among interested parties and business potential - Will the company survive without support?
The following is a summary of the agreement.
The Korean government reviewed GM’s viability plan for GM Korea, which contains outlooks for the unit’s business sustainability and long-term profit, and Korea Development Bank (KDB) decided to provide US $750 million to help GM Korea continue its operation.
GM, as largest shareholder, to covert 100 percent of existing loans into shares
- GM to convert the US $2.8 billion loans owed by GM Korea into preferred stocks via a debt-to-equity swap
- GM Korea expected to save around 150 billion won in interest annually
GM and KDB to provide new money of US $3.6 billion and US $750 million, respectively, to GM Korea
- GM to provide a total of US $3.6 billion in new loans, US $2.8 billion of which will be a 10 year line of credit with interest rates lower than the existing ones
- KDB to provide US $750 million in investments
- GM Korea expected to save around 3.7 trillion won for the next 10 years according to the latest agreement with the union on labor costs and welfare benefits
GM required to keep its position as largest shareholder for next 10 years
- GM not to sell any of its stake in GM Korea for the next 5 years until 2023, and keep its shares more than 35 percent thereafter until 2028
- KDB to be the second largest shareholder of GM Korea, and continue to have veto power in key management decision, such as the sale of assets
- KDB to work to increase management transparency, such as checking the implementation of the viability plan
GM to seek business sustainability
- GM to work to increase profit, such as by arranging new models to be produced in Korea and reducing labor costs
- GM to set up its Asia-Pacific headquarters in Korea, as well as strengthen the existing R&D and design centers
The government also unveiled its plans to support local suppliers.
Provide financial support, as well as consultation services, to GM suppliers
- Offer low interest rate loans to those seeking business restructuring, investing in R&D and working to improve productivity
- Extend loan maturity for those suffering decreases in demand
- Provide new loans, extended maturity and lowered interest rates to those with great potential
Launch a R&D support for the country’s auto part manufacturers
- Support those working on future cars, including electric cars and driverless cars, as well as those supplying parts for new models
- Assess the R&D project, technologies involved and the amount of supply to the global market, and provide support accordingly
Help the Gunsan economy: Timely implement the supplementary budget earmarked for the economy, worth 1 trillion won
- Help develop new industries most fit for the region, such as testing electric cars, and work on building a new renewable energy cluster, which has offshore solar panels and fuel cell test centers
- Provide fiscal support: Increase the local facilities investment support, give startups corporate and income tax exemptions for 5 years, and lower the rate for leasing state-owned properties
Please refer to the attached pdf