The state-run Korea Development Bank said Sunday it will thoroughly look into the cost structure of GM Korea Co. this week as it mulls whether to provide fresh loans to the loss-making South Korean unit of General Motors Co.
In a meeting with GM Executive Vice President Barry Engle in Seoul on Friday, KDB Chairman and Chief Executive Lee Dong-gull agreed that the state bank will begin due diligence on GM Korea in a "fair and transparent" manner this week though the Detroit carmaker has yet to submit "very sensitive" data to the Korean lender, a KDB official said over the phone.
But the KDB's claim contradicts a statement by GM, which said most of the necessary documents have already been sent to South Korea to help kick off the due diligence process.
"All the requested materials have been compiled," Engle said in a letter sent to GM Korea President and CEO Kaher Kazem on March 5, three days before his meeting with the KDB chairman.
These photos show KDB Chairman and CEO Lee Dong-gull (L) and GM Executive Vice President Barry Engle. (Yonhap)These photos show KDB Chairman and CEO Lee Dong-gull (L) and GM Executive Vice President Barry Engle. (Yonhap)
This clearly shows how differently the two parties understand the documents requested by the KDB to start the review. When exactly due diligence will begin has not been set.
"All written documents have been sent to the KDB. As for data involving transactions between GM and GM Korea, (GM and the KDB) can discuss such issues during talks," a person with direct knowledge of the matter told Yonhap News Agency by phone.
GM asked the KDB to complete due diligence within a month but the state lender demanded two to three months as it needs to thoroughly review GM Korea's financial status and its parent GM's investment plans in its Korean unit to decide on any fresh loans to it.
After announcing its plan on Feb. 13 to shut one of its four car assembly plants in South Korea by May and decide on the fate of the remaining plants within weeks, GM has been putting pressure on the KDB to participate in efforts to turn GM Korea around by injecting fresh capital.
While demanding support and sacrifice from all stakeholders in GM Korea, Engle said in the statement that GM plans to convert all of the outstanding $2.7 billion worth of debt GM Korea owes to its parent firm and allocate "two important new global product programs with strong export demand around which the company can build a strong business with better margins and more stable production."
He also asked the KDB, as the second-largest shareholder in GM Korea, with a stake of 17 percent, to participate in its $2.8 billion investment plan in the ailing carmaker. But all the proposals are based on financial support from the Korean government, it said. GM owns a 77 percent stake in GM Korea and SAIC Motor Corp. controls six percent.
In response, the KDB made it clear that a new cash injection will be possible only when GM comes up with a "viable" plan to revive and maintain its Korean operations.
If GM fails to submit the sensitive data to the KDB, however, due diligence may not result in any fresh loan from the Korean government, KDB officials said.
PricewaterhouseCoopers will carry out a detailed review on behalf of KDB with an aim to finish the process by the end of April, according to the state bank.
Under the ongoing self-help program, 2,500 workers have applied for a voluntary retirement program offered by GM Korea. The company demanded its 16,000 workers accept a wage freeze and no bonuses for this year.
This week, the company and the union are expected to have talks over the proposed wage terms.
In 2017, GM Korea's sales fell 12 percent on-year to 524,547 vehicles, with its four plants producing 520,000 cars out of a total capacity of 910,000. (Yonhap News)