Makeshift bailout package is far from satisfactory
The government ratified a $7.15-billion plan to normalize GM Korea's management, at an economic ministers' meeting Thursday.
Under the agreement, GM will convert $2.8 billion worth of debt owed by GM Korea into shares and extend loans totaling $3.6 billion. The state-run Korea Development Bank (KDB), the second-largest shareholder of GM Korea, will inject $750 million to keep the carmaker afloat.
In return, GM will maintain its presence here at least for the next decade, and must get the KDB's approval for any asset disposal. The U.S. auto giant will also relocate its Asia-Pacific headquarters from Singapore to Korea.
The accord has put an end _ for now _ to the "GM Korea turmoil," which broke out with the company's decision to shut down its Gunsan plant three months ago. The makeshift bailout package is far from satisfactory, however.
Above all, the KDB deserves criticism for failing to clarify reasons for GM Korea's mismanagement despite its due diligence _ or not releasing its findings to the public. Such a failure reaffirms the critics' suspicion that the government has been pulled along by GM for fear of losing 150,000 jobs, including those at its suppliers, as a result of the company's withdrawal, in the run-up to June 13 local elections.
The Detroit-based automaker had been suspected of swelling the prices of parts and components transferred to its Korean offshoot, making it impossible for the latter to keep its operations in the black. GM also allegedly used various means to avoid corporate tax payments, while squeezing GM Korea dry with high-interest loans. GM has agreed to set its interest rate for additional loans at 3.48 percent, compared with 4.8 percent to 5.3 percent on the existing lending, virtually acknowledging its usurious practice so far.
Government officials here stressed the KDB's additional funding remains at the a 10th of the level of GM. However, they must realize the $750 million is taxpayers' money, which could have been spared had they remained alert. The only viable solution is for GM to allocate the manufacturing of popular models to Korea, and GM Korea's union and management to enhance competitiveness and productivity. Otherwise, Koreans might have to pay additional money 10 years from now.
The government ratified a $7.15-billion plan to normalize GM Korea's management, at an economic ministers' meeting Thursday.
Under the agreement, GM will convert $2.8 billion worth of debt owed by GM Korea into shares and extend loans totaling $3.6 billion. The state-run Korea Development Bank (KDB), the second-largest shareholder of GM Korea, will inject $750 million to keep the carmaker afloat.
In return, GM will maintain its presence here at least for the next decade, and must get the KDB's approval for any asset disposal. The U.S. auto giant will also relocate its Asia-Pacific headquarters from Singapore to Korea.
The accord has put an end _ for now _ to the "GM Korea turmoil," which broke out with the company's decision to shut down its Gunsan plant three months ago. The makeshift bailout package is far from satisfactory, however.
Above all, the KDB deserves criticism for failing to clarify reasons for GM Korea's mismanagement despite its due diligence _ or not releasing its findings to the public. Such a failure reaffirms the critics' suspicion that the government has been pulled along by GM for fear of losing 150,000 jobs, including those at its suppliers, as a result of the company's withdrawal, in the run-up to June 13 local elections.
The Detroit-based automaker had been suspected of swelling the prices of parts and components transferred to its Korean offshoot, making it impossible for the latter to keep its operations in the black. GM also allegedly used various means to avoid corporate tax payments, while squeezing GM Korea dry with high-interest loans. GM has agreed to set its interest rate for additional loans at 3.48 percent, compared with 4.8 percent to 5.3 percent on the existing lending, virtually acknowledging its usurious practice so far.
Government officials here stressed the KDB's additional funding remains at the a 10th of the level of GM. However, they must realize the $750 million is taxpayers' money, which could have been spared had they remained alert. The only viable solution is for GM to allocate the manufacturing of popular models to Korea, and GM Korea's union and management to enhance competitiveness and productivity. Otherwise, Koreans might have to pay additional money 10 years from now.
![[INTERVIEW] Choi Min-sik, Lee Dong-hwi on creating Korean-style noir with 'Big Bet'](https://img.koreatimes.co.kr/upload/thumbnailV2/8b795a8f6b42492db4e8fdc47e9abd8d.jpg/dims/resize/178/optimize)
