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GM local unit puts off debt payment to Detroit

Feb 24,2018
General Motors has taken a step back on restructuring its troubled Korean unit Friday by extending the due date of the loan that GM Korea owes to the U.S. headquarters until an audit of its books is completed for the Korean government.

The Detroit-based automaker did not request additional conditions for extending the expiration date.

There was speculation that the U.S. auto giant might demand GM Korea’s Bupyeong plant be used as collateral for the unpaid debt. That issue was not discussed during GM Korea’s board meeting held Friday at the company’s headquarters in Bupyeong, according to GM Korea.

According to the Financial Supervisory Service, GM Korea borrowed 2.97 trillion won ($2.75 billion) from its U.S. headquarters in 2012 at an interest rate of up to 5.3 percent.

General Motors collected some 400 billion won from GM Korea, which is part of the 1.13 trillion won that was supposed to be paid back by the end of last year. GM Korea extended the due date for the remaining 720 billion won to the end of February.

At the board meeting Friday, GM Korea said it would extend the payment again until due diligence on its financial condition is over. There is no indication how long the process will take.

As the Korean government and General Motors agreed upon resolving the latest crisis in a “speedy manner,” the auditing process is expected to take no more than two months.

Korea Development Bank, GM Korea’s second-largest shareholder after General Motors, appointed Samil PwC as the auditing firm to look into the financial stance of the ailing automaker.

Financial pressure on GM Korea and its threats to shut down factories, however, are expected to continue.

According to GM Korea’s financial statement, GM Korea owes its headquarters another payment of 988 billion won by the first week of April.

“GM’s latest decision is a relief for GM Korea because if the due date hadn’t been extended, the pressure on GM Korea’s cash flow and overall management would have been doubled,” said Kim Pil-soo, an automotive professor of Daelim University.

“But this is just a temporary fix. The government has to come up with a more detailed master plan including new investment to solve the crisis,” he added.

At a meeting between the ruling party and the government on Friday, the Democratic Party reiterated three principles laid out by the government in a Thursday meeting with General Motors International President Barry Engle: General Motors behaving responsibly, sharing pain among shareholders, creditors and workers, and coming up with a long-term turnaround plan.

BY JIN EUN-SOO [jin.eunsoo@joongang.co.kr]