ALSO READExclusive: South Korea may sign GM Korea funding deal by April 27 - KDB chair Exclusive: South Korea's KDB eyeing deal by April 27 to inject funds into GM Korea GM to shut South Korean plant, more cuts could follow Exclusive: GM plants to cut 5,000 South Korean jobs, keep production at current level - document Explainer: In South Korea, U.S. cars are rare, and often German or Japanese
By Hyunjoo Jin and Ju-min Park
SEOUL (Reuters) - Korea Development Bank (KDB) may sign a preliminary agreement by April 27 to financially support General Motors Co's troubled South Korean unit, provided interim due-diligence on the unit is satisfactory, the chairman of the lender said.
This is the first time KDB has offered a time-frame for a decision on whether to financially back GM Korea, in which the state-run lender has a 17 percent stake. The bank and government officials have so far been non-committal.
GM proposed in February an investment of $2.8 billion into its money-losing South Korean operations over 10 years, days after announcing a sweeping restructuring. It has asked Seoul to provide a share of the funds for the overhaul.
The U.S. automaker owns 77 percent of GM Korea, while GM's main Chinese partner, SAIC Motor Corp Ltd, controls the remaining 6 percent.
GM's president told Reuters last week that common ground must be reached on a long-term restructuring of GM Korea by this Friday, and if there was none, the operation would likely seek bankruptcy protection.
GM shocked South Korea in February with plans to close one local plant and leaving the fate of three others unclear. It is seeking government funding and incentives as well as labour cost cuts to save the unit, which in 2017 posted a net loss of $1.1 billion, its fourth straight year in the red.
"If GM injects equity into the unit, we will inject equity. If GM extends loans to the unit, we will extend loans as well," Lee said, adding KDB prefers to take part in a rights offering rather than lending to the unit.
"We may be able to reach a very meaningful agreement by April 27, whether it is a verbal promise or conditional MOU," he said, referring to a memorandum of understanding.
KDB's interim due diligence report on GM Korea is scheduled to be out on Friday, but GM Korea has so far not submitted sufficient documents for South Korea to assess its financial viability, Lee added.
He said the bank would be able to sign a legally binding deal with the automaker after a final report is out in late April or early May.
Lee said GM should offer a long-term commitment to South Korea to get government support.
"They have to show a commitment to remaining as a good corporate citizen," Lee said.
"What GM really needs to know is that anti-GM sentiment is very strong in South Korea. I told GM that they need to make me feel comfortable before I can make some kind of decisions."
GM Korea was one of GM's major manufacturing and engineering bases in Asia after its 2002 purchase of failed South Korean car maker Daewoo Motors. But the unit has struggled in recent years since GM pulled its Chevy brand from Europe, hitting exports to GM Korea's major market.
"The mutual trust hit rock bottom. We have to enhance trust and this will not happen overnight," Lee said.
On Tuesday, Hong Young-pyo, a ruling party lawmaker, met GM and union officials and called for the two sides to reach an agreement by April 20 to pave the way for government support.
"The time bomb is ticking," he told reporters.
($1 = 1,067.4100 won)
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)