KDB backs GM Korea's spinoff plan

By Lee Kyung-min

The Korea Development Bank (KDB) said Tuesday that it will support GM Korea spinning off its research unit, a dramatic reversal from its earlier opposition to the controversial plan that the company's union has strongly protested against.

The KDB said the spinoff will help the Korean unit of the U.S. auto giant boost profitability by strengthening its corporate management via proper debt management, and provide a boost in corporate value.

KDB Chairman Lee Dong-gull / Yonhap

“We asked a disinterested, outside party to review the carmaker's business plan and determined that the current contract will best serve the interests of those involved,” KDB Chairman Lee Dong-gull said at a press conference at company headquarters in Seoul.

“A legal consultation also showed that the current plan will help us reduce costs, given we have limited means of seeking redress measures as KDB is not a direct party to the business contract. Should we resort to legal proceedings, the dragged-out process will pose a major hurdle to the normalization of the carmakers operations.”

The KDB said in a statement that the research body will focus on developing Sports Utility Vehicles (SUV), thereby creating a stable line of production, and a source of revenue for GM Korea.

“The research body will also help boost economy as many subcontractors and business partners will be able to make a living, which will also create jobs,” it said.

The bank's board held a meeting earlier in the day and passed a motion approving of the spinoff.

The state-run bank also dropped an injunction filing, a move that sought to nullify the spinoff decision reached at a shareholders' meeting that its officials failed to attend. An incident that the union said illustrated incompetence.

Following the announcement, the KDB will proceed with the provision of the second part of a $750 million government lifeline, which is due Dec. 26.

The spinoff plan heightened concerns at both the state lender and the union over the possible withdrawal of GM from Korea.

The KDB feared 800 billion won in taxpayers' money would have been lost, while union members were worried about layoffs.

The union immediately said it would mount a protest amid concerns that GM will just retain the low-cost research unit here and shut down its costly manufacturing facilities.

“We cannot accept the spinoff, which we still view is nothing but a pretext for a complete withdrawal of their business from Korea, the same as they did in Russia and Vietnam,” an official from the union said.

The KDB has been criticized for having failed to require GM Korea to elaborate on its future plans for Korea.