FSC chief praises GM Korea rescue deal

By Kim Yoo-chul

Financial Services Commission (FSC) Chairman Choi Jong-ku hailed General Motors' (GM) decision to inject $6.4 billion into its unprofitable Korea affiliate to keep it afloat.

“The agreement between GM and related parties is ideal,” Choi said in a press conference held in the central government complex, downtown Seoul, Wednesday.

Last month, GM and the government reached a preliminary deal to inject $4.35 billion into GM Korea. The U.S. automaker had previously closed one of its four Korean plants and announced plans to cut its workforce by 3,000 workers.

The FSC chairman said GM “guaranteed” the money because it has no plans to exit Korea.

“GM has guaranteed its commitment to turning its Korean business around and as far as I know, the total financial support package will be $6.4 billion. GM became an equity holder in GM Korea after agreeing to provide $3.6 billion in fresh funding,” Choi told reporters, adding the deal wasn't only intended for debt restructuring.

“Given the amount of investment, it's fair to say GM is one of the largest foreign investors in the country; therefore, the FSC and related parties approached the issue from a different standpoint,” said Choi. “The Korea Development Bank's (KDB) stance was to act as a policy branch.”

GM owns 77 percent of the shares in GM Korea, while KDB owns 17 percent and China's SAIC Motor, 6 percent.

Choi said GM agreed to limit its right to sell shares and assets in its Korean unit, meaning the automaker will not leave the country for at least “a decade.”

“The government wants GM to stay as a long-time foreign investor. It mandated some conditions and GM agreed. This is I think the most significant achievement,” Choi noted.

Under the deal, KDB will regain veto power allowing it to block the sale of 20 percent or more shares in GM Korea. Choi said the FSC was hoping to reach a “binding and final” agreement with GM this week.

Separately, the top regulator demanded financial affiliates of the country's leading conglomerates to unload their holdings in non-financial units to boost transparency and comply with IFRS17 accounting compliances.

“The FSC will offer support to financial affiliates of conglomerates if they submit plans for greater transparency that will be beneficial to the financial market and minority shareholders. Also, we will keep an eye on speculative foreign investment,” Choi said.

But he denied speculation that this was aimed at reducing the influence of Samsung. Samsung Life owns 34.7 trillion won worth of shares in 13 Samsung affiliates, including an 8.23 percent stake in Samsung Electronics worth 27 trillion won as of last year.

Samsung Life is central to Samsung's cross-holding structure. The group's de-factor head, Vice Chairman Lee Jae-yong, has a 0.57 percent stake in Samsung Electronics.