The South Korean government’s financial support for companies working with GM Korea has come to an end.
Since GM Korea decided to spin off its R&D unit into a separate company in July this year, financial support for its partner firms has almost ended. The government is planning to support the auto parts industry as a whole while ending the support targeting GM Korea’s partner firms. Recently, Lee Dong-gul, chairman of the Korea Development Bank (KDB), which is the second largest shareholder in GM Korea, said that the bank may not provide the US$375 million that is scheduled to be provided to GM Korea as the automaker’s facility funds.
Under the circumstances, the partner firms are likely to face the worst situation if the disputes between the KDB and GM Korea intensify over the R&D unit spin-off issue.
According to the government, the task force of the Financial Services Commission (FSC) and the Financial Supervisory Service (FSS), which was set up in May this year to implement capital provision to GM Korea, is closed now. “The task force provided more than 360 billion won until the end of May and has provided little additional financing since the following month,” it explained.
The task force provided 269 loans, worth 362.7 billion won in total, for the partner firms until the end of May. The loans are divided into 196 loans (321.2 billion won) for primary subcontractors and 73 (41.5 billion) for secondary and tertiary. The financial support took the form of maturity extension, new loans, and postponement of principal and interest repayment. After GM Korea decided to separate its R&D unit from the manufacturing facilities, the KDB said that there would be no additional support.
The government is going to provide financial support of one trillion won for auto parts manufacturers, but it is still unclear whether the beneficiaries will include those working with GM Korea. “Of the total, 500 billion won will be executed until the first half of next year, and beneficiaries will be chosen through examinations by the Korea Credit Guarantee Fund and the Korea Technology Finance Corporation,” the government said. According to industry sources, those working with GM Korea may not be included in the beneficiaries. “The upcoming program is to help out small firms as a whole,” the FSS said.
In the meantime, the KDB said last week that as it has invested 800 billion won in GM Korea, the automaker should maintain its operations in Korea for at least 10 years, and otherwise, it would file a suit against the GM headquarters. “A total of US$750 million won is scheduled to be provided to GM Korea and half of it is yet to be provided,” the KDB chairman remarked, adding, “The half may not be given as the case may be.”