Two days since GM Korea and the union narrowly avoided court protection, GM headquarters is speeding up its push to reach an agreement with the South Korean government for funds, in a bid to complete negotiations before Thursday evening, when its first quarter earnings conference call will be made.
GM has reportedly, for the most part, agreed to accept the government’s request to stay in Korea for over 10 years along with reviving the state-run Korea Development Bank’s veto rights.
KDB is GM Korea’s second-biggest shareholder with 17.02 percent stake.
Discussions on selective capital reduction -- which the government has been pushing for in order to keep its voting power after the debt-equity swap -- have halted due to opposition from GM.
KDB’s shares would drop to less than 1 percent when GM converts the local unit’s $2.7 billion debt to equity as promised.
President of GM International Barry Engle (third right) answers reporters' questions at the KDB headquarters' on Tuesday afternoon. (Yonhap)
The two parties are highly likely to put together a deal that grants the KDB veto power in case GM attempts to sell its shares or capital of GM Korea within the next 10 years, resembling the terms GM had agreed to when it acquired Daewoo Motors in 2002, experts said.
To revive the KDB’s veto rights, GM Korea would adjust the current terms that mandates over 85 percent approval of shareholders to pass special resolutions.
KDB Chairman Lee Dong-gull and Financial Services Commission Chairman Choi Jong-ku have repeatedly reiterated the government’s stance that the 500 billion won support will be provided only if GM offers viable business plans.
GM Korea and KDB declined to provide details on on-going developments.
Regarding GM’s application for GM Korea’s factories in Bupyeong, Incheon and Changwon of South Gyeongsang Province to be designated foreign investment zone, Rep. Hong Young-pyo of the ruling Democratic Party said, “The government will provide support in accordance with the law and rules. There are no grounds under the current law to designate and support (GM’s request).”
Hong, who is also head of GM task force committee at the ruling Party, made the remarks during a press conference on GM Korea at the National Assembly on Tuesday.
After attending a meeting with KDB Chairman Lee Dong-gull and President of GM International Barry Engle on Tuesday afternoon at the KDB headquarters, Hong said, “GM requested KDB to decide on support measures as soon as possible, earlier than the 27th.”
GM had initially asked the government to finalize the position on funds by Friday, but is reportedly pushing to expedite negotiations in time for the headquarters’ conference call with investors scheduled on Thursday morning, local time, to discuss its first quarter performance during which it would have to give an update on restructuring efforts here.
Clarifying uncertainties on the local unit would be essential particularly as GM looks set to post a 16 percent on-year drop in profit of $34.6 billion in the first quarter of this year.
GM had officially shared its plans to make changes at GM Korea in its conference call for the fourth quarter of last year held this February. The closure of GM Korea’s Gunsan plant in North Jeolla Province was announced in the following week.
Meanwhile, some 13,000 union members of GM Korea will hold a vote on the temporary agreement reached on Monday for two days until Thursday, the company said.
By Kim Bo-gyung (email@example.com