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GM to Accept KDB’s Preconditions for Financial Support for GM Korea
Just GM’s Sincerity Remains
GM to Accept KDB’s Preconditions for Financial Support for GM Korea
  • By Jung Min-hee
  • February 22, 2018, 03:15
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GM International President Barry Engle decided to accept KDB Chairman Lee Dong-geol’s preconditions and principles for financial support for GM Korea.
GM International President Barry Engle decided to accept KDB Chairman Lee Dong-geol’s preconditions and principles for financial support for GM Korea.

 

The Korea Development Bank (KDB) said on February 21 that GM International President Barry Engle decided to accept KDB Chairman Lee Dong-geol’s preconditions and principles for financial support for GM Korea. Although the bank did not explain what the preconditions are, these are likely to include due diligence for removing doubts about GM Korea’s business and a detailed business recovery plan presented by GM, which have been called for by the South Korean government.

The due diligence is scheduled to be initiated once working-level talks for the purpose are completed. The two sides selected Samil PricewaterhouseCoopers as the agency to be in charge of the process that day. The scope of the due diligence has yet to be determined.

The degree of GM’s cooperation for the due diligence still remains to be seen though. The KDB chairman has demanded a long-term business recovery plan and transparent financial data as his principles for the financial support. The future of GM Korea is likely to hinge on how much data GM will disclose during the due diligence process.

“It seems that we avoided the worst-case scenario as the president of GM International decided to cooperate,” the South Korean government explained, adding, “However, GM’s sincerity during the due diligence process remains to be seen.” The government is planning to discuss the GM Korea issue at a ministerial meeting scheduled for next month.

Last month, the KDB made eight requests to GM. These include not only the business recovery plan and financial data but also a cut in the interest rate applied to GM’s lending to GM Korea, an increase in GM Korea’s production volume, and the KDB’s rights as an auditor. GM turned down the requests at that time.

“GM Korea’s total losses amounted to 1.07 trillion won (US$960 million) in 2017 alone, which means support from the headquarters is indispensable and a tug of war is likely to continue between the government and GM in spite of the GM International president’s change in stance,” said an industry source.The Korea Development Bank (KDB) said on February 21 that GM International President Barry Engle decided to accept KDB Chairman Lee Dong-geol’s preconditions and principles for financial support for GM Korea. Although the bank did not explain what the preconditions are, these are likely to include due diligence for removing doubts about GM Korea’s business and a detailed business recovery plan presented by GM, which have been called for by the South Korean government.

The due diligence is scheduled to be initiated once working-level talks for the purpose are completed. The two sides selected Samil PricewaterhouseCoopers as the agency to be in charge of the process that day. The scope of the due diligence has yet to be determined.

The degree of GM’s cooperation for the due diligence still remains to be seen though. The KDB chairman has demanded a long-term business recovery plan and transparent financial data as his principles for the financial support. The future of GM Korea is likely to hinge on how much data GM will disclose during the due diligence process.

“It seems that we avoided the worst-case scenario as the president of GM International decided to cooperate,” the South Korean government explained, adding, “However, GM’s sincerity during the due diligence process remains to be seen.” The government is planning to discuss the GM Korea issue at a ministerial meeting scheduled for next month.

Last month, the KDB made eight requests to GM. These include not only the business recovery plan and financial data but also a cut in the interest rate applied to GM’s lending to GM Korea, an increase in GM Korea’s production volume, and the KDB’s rights as an auditor. GM turned down the requests at that time.

“GM Korea’s total losses amounted to 1.07 trillion won (US$960 million) in 2017 alone, which means support from the headquarters is indispensable and a tug of war is likely to continue between the government and GM in spite of the GM International president’s change in stance,” said an industry source.