Restructuring Direction
Financial Services Commission (FSC) Chairman Choi Jong-ku held a press conference in Seoul on March 14 and said that GM is willing to stay in the South Korean automobile market. According to him, the automaker recently said that it would cooperate actively for due diligence on GM Korea.
“GM Korea’s current cost-to-sales ratio is 93% and the company can operate in the black once the ratio is dropped to 80% or so as in the case of Hyundai Motor Company,” he explained, pointing out, “For this to be done, GM Korea should increase its production and sales.”
His remarks imply that GM needs to allow GM Korea to produce new models given the fact that a decline in sales has been the main cause of GM Korea’s profitability deterioration and the South Korean government will provide its assistance if GM properly addresses this matter.
Likewise, the Korea Development Bank (KDB) said that it will provide a short-term bridge loan if GM Korea cooperates with sincerity for the due diligence. The KDB and GM had a meeting on March 12 to discuss details related to the due diligence, which was initiated on March 14.
When it comes to Kumho Tire, the chairman of the FSC stressed the importance of an agreement between its employers and employees, asking union members to agree on the company’s self-help measures. What this implies is that the South Korean government has opted for sale to Doublestar Tire on the premise of union members’ cooperation as the direction of business restructuring to be applied to Kumho Tire. The union members went on a one-day general strike on March 14.