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GM Calls for Swift Designation of GM Korea Factories as Foreign Investment Zones
Liquidity Crisis
GM Calls for Swift Designation of GM Korea Factories as Foreign Investment Zones
  • By Michael Herh
  • March 28, 2018, 03:15
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GM Korea applied for the designation of its factories in Bupyeong and Changwon factories as foreign investment zones on March 13.
GM Korea applied for the designation of its factories in Bupyeong and Changwon factories as foreign investment zones on March 13.

 

Barry Engle, president of GM International, called on the Korean government for a swift due diligence inspection and the designation of GM Korea factories as foreign investment zones, citing a liquidity crisis in April.

According to the Ministry of Trade, Industry and Energy on March 27, Engle who have visited Korea for the fifth time since the GM Korea Incident, met with Lee Dong-geol, chairman of the Korea Development Bank (KDB) in the morning and Lee In-ho, deputy minister of trade, industry and energy and Koh Hyung-kwon, first deputy minister of strategy and finance in the afternoon. The Ministry of Trade, Industry and Energy said that GM inquired about progress in the designation of GM Korea's worksites as foreign investment areas.

Earlier on March 13, GM Korea applied for the designation of its factories in Bupyeong and Changwon factories as foreign investment zones at the local governments of Incheon and Gyeongsang-nam-do, respectively. The local governments are currently reviewing the application with the Ministry of Trade, Industry and Energy.

The current Foreign Investment Act allows the local governments to designate foreign investment areas through deliberation if investment of more than 30 million dollars is made in new facilities in the manufacturing industry based on the Restriction of Special Taxation Act. In the case of corporation tax, foreign investors can enjoy 100% exemption for five years and then 50% for two years. They can also enjoy benefit in terms of not only acquisition tax, registration tax, property tax and comprehensive land tax but local governments’ cash support and rent support for the use of national or public property.

With respect to this matter, the Korean government said, "We are studying if GM's investment plan is in compliance with requirements stipulated by law." Engle also mentioned labor and management issues when he met with the government officials. "Mr. Engle mentioned that it was time for labor-management negotiations to produce some outcomes and explained that the management needed cooperation from the labor union to normalize management such as the allocation of new cars," said an official of the Ministry of Trade, Industry.

"The Korean government requested the submission of a self-help plan by April 20," Engle said in a meeting with the union leadership on the previous day. "There is no reason for the government to intervene in the matter between the labor and management," the official said regarding Engle’s statement. However, Engle directly mentioned a need for union cooperation to the government, which made it impossible to rule out a possibility of direct or indirect government involvement.

Engle met with KDB chairman Lee at the KDB headquarters in Yeouido, Seoul and discussed a due diligence inspection of GM Korea which was in its second week. Engle requested GM Korea's second-largest shareholder KDB to give financial support to GM Korea, explaining GM's liquidity in April. On the previous day, Engle said GM Korea would need about US$ 600 million more for GM Korea’s operation, retirement allowances and fees for partners in late April in talks with trade union leaders.