The Korean unit of General Motors Co. is to receive about $2.8 billion from its headquarters, for new investment to avoid falling out of business due to recurring losses. The company has gone through tough times for a while, and this affected its production volume. The purpose of the fund is to conduct research and create ways of building attractive model of cars, and to provide new facilities for business in the next ten years. The auto company also plans to fix its $2.8 billion debt through legitimate means. This was gathered from a Bupyeong-based lawmaker during a phone conversation. Bupyeong is also the location of GM Company Korea unit.
The company initiated a capital-intensive plan to create a product by March this year. With this huge capital plan, the company intends to create products that will compete favorably with rival companies in the auto industry. Activities to carry out the plan begins soon and will run efficiently throughout the next decade. The company is so sure that its plans will work out this time, but did not disclose the financial request made to the South Korean government.
The current state of GM Korean unit was made public when it announced that it was closing down its Gunsan branch following repeated financial loss. The decision could be reversed if financial aid comes on time to save the escalating situation.
GM opted for equity to come out of its $2.8 billion debt. This involved a huge sum and could place the company in an unfavorable position of paying a yearly interest of 200 billion won for as long as the debt lasts. According to an erstwhile head at Daewoo, the amount GM seeks from the Korean government and the Korean Development Bank is yet to be disclosed. However, about 500 billion won is being estimated. Due to the size of capital involved, the Korean government has taken some steps to find out if investing such huge amount of money in the company will yield good profits. An agency, Samil PwC, has been assigned to do some findings on the potential of the investment to yield returns.
GM hopes to regain its business position in Korea by increasing production rate. New SUVs will be produced at its Bupyeong and Changwon units. Korean lawmakers headed by Hong have held discussion with Barry Engle, GM’s international Chief, on the current state of the company in Korea. South Korean government is deliberating on ways to grow other businesses in Gunsan, since the area has been having employment problems due to GM business shut down which could affect 2,000 jobs. GM’s unit in Korea alone has about 16,000 staff, and around 150,000 jobs related to car manufacturing would be lost too. There is still the possibility that GM will completely move out of Korea, though the government is yet to support the decision. The general belief is that GM will recover and invigorate the Korean economy once again.
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