KDB Officially Acknowledges Possibility of GM’s Withdrawal from Korea

The Korea Development Bank (KDB) officially recognized a possibility of GM’s withdrawal from Korea. In fact, there will be no way to stop GM if the automaker withdraws from Korea. The state-owned bank is the second largest shareholder with a 17% stake in GM Korea.

According to a report by the KDB on the status of GM Korea submitted, Ji Sang-wook, a lawmaker of the Bareun Party, the KDB raised the possibility, citing its worsening internal and external business conditions, a soon-to-be-lifted constraint on the ban on GM’s sale of its stake in the automaker, a mood for GM to reduce its overseas production and the CEO’s resignation before completing his official term as grounds.

GM Korea recorded deficits over the past three years. After chalking up losses in the first quarter of this year, GM Korea fell into a state of complete capital impairment. Also, this October, GM will be free from a ban to prevent the automaker from selling off its stake in GM Korea. When GM acquired Daewoo Motors in 2002, the automaker promised to keep its management right for 15 years.

The KDB also regarded as grounds for GM’s withdrawal the fact that GM showed moves to leave overseas countries and James Kim, president of GM Korea abruptly quit although his official term ends in March of next year. The Korea Development Bank said in its report that there will be no means to prevent GM from withdrawing from Korea if the automaker does that via the sell-off of its stake or plant closures among others.

This is because the as far as the lift of the ban on GM’s sell-off of its stake is concerned, the KDB cannot exercise a veto to a special resolution in the general shareholders' meeting.

The KDB secured a veto over a special resolution of the general shareholders' meeting, including the disposal and transfer of assets exceeding 20% of GM Korea’s total assets through an agreement among shareholders. In addition, it is impossible for the KDB to take part in GM Korea management as a creditor because GM Korea owes the KDB nothing, the KDB added.