Two-faced GM
General Motors (GM) Korea, which pledged to invest US$2.8 billion (2.99 trillion won) over the next ten years, has unveiled a direct investment plan worth US$1.6 billion (1.71 trillion won). Accordingly, critics say the company inflated the amount of new investments to receive financial support from the South Korean government.
According to industry and related agency sources on March 28, GM Korea submitted its new investment plan to Incheon and South Gyeongsang Province where its plants are located and stated the amount of its new investments – US$1 billion (1.07 trillion won) for five years and US$1.6 billion (1.71 trillion won) for ten years. The company said it plans to change more than 70 percent of production lines at the Bupyeong plant in Incheon to allocate a new sport utility vehicle (SUV) model after the Chevrolet Trax and at the Changwon plant in South Gyeongsang Province for a new crossover utility vehicle (CUV) model, and create a collision test center with the investments.
However, the amount of investments in its investment plans shows a big difference with the one GM announced earlier. GM promised to invest an additional US$2.8 billion (2.99 trillion won) over the next decade during a meeting with South Korean lawmakers at the National Assembly in Seoul. At the meeting, GM asked the South Korean government and Korea Development Bank (KDB) to provide financial support, such as investment and loan, and the labor union to help the company reduce operating costs as the company plans to make a large-scale investment.
An official from Incheon Metropolitan City said, “I think what GM is trying to say is that its new investments amount to US$2.8 billion (2.99 trillion won), including US$1.6 billion (1.71 trillion won) of its foreign direct investment (FDI), US$500 million (534.5 billion won) of investments from its second largest shareholder, KDB, and other operational funds.”
The government says it is absurd. An official from the government, “From a common-sense point of view, new investment means what a company actually makes a direct investment. It doesn’t make sense to include the amount of financial support from South Korea, other than direct investment, in new investments.”
Controversy over the issue is expected to grow. An official from the office of Hong Yong-pyo of the ruling Democratic Party of Korea said, “One of the most important conditions for the government to support GM is GM’s veracity for new investment. When the two fail to narrow the difference of opinion, they will not be able to reach an agreement on restructuring.” An official from GM said, “The specific investment plan hasn’t confirmed but the US$2.8 billion (2.99 trillion won) investments will not include various operational funds.”