Korean division of General Motors company avoided bankruptcy by signing a special agreement with GM International, but analysts and the South Korean government doubt the ability of the unprofitable enterprise to remain in the market for a long time.
Under the agreement, GM International will not be able to sell any of its 77% stake in GM Korea for the next five years. In addition, until 2028, the company shouldn’t allow the fall of its unit shares below 35%. The restriction aims at preventing GM from leaving the South Korean market.
Besides, the Detroit automaker and the Korean Development Bank (KDB) have already concluded a preliminary agreement for $7.15 billion, $2 billion of which will be the GM International investments. Another $2.8 billion of debt will be exchanged for GM Korea shares.
GM International will also open its representative office in South Korea as a confirmation of its intentions. At the same time, the company does not have similar plans regarding China.
GM will also increase purchases of components from South Korean suppliers to 2 trillion won ($1.85 billion) per year.
In turn, South Korea will finance the activities of local suppliers of GM and other South Korean automakers for the industry development. Apart from that, the government will take into account the risk of closing 156,000 jobs in GM Korea, as this will affect the country’s exports and economy in general and the entire South Korean auto industry in particular.
In conclusion, GM International president Barry Engle noted that his company has a bright future in the South Korean market.