General Motors’ stake in troubled South Korean unit GM Daewoo has risen to 70.1% from 51% while key creditor Korean Development Bank’s (KDB) stake fell to 17% from 28% after the parent firm was the sole subscriber to a KRW491.2bn (US$412.7m) rights offer.
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“The successful completion of the equity rights issue significantly strengthens GM DAT’s liquidity and balance sheet position as we look to resume our strong growth,” said Mike Arcamone, president and CEO of GM DAT, in a statement. “We are grateful for the support and confidence of our major shareholder.”
“GM’s decision to increase its equity in GM DAT signifies the importance of our Korean business unit to GM’s global operations,” said Nick Reilly, head of GM International Operations. “GM DAT will continue to play a significant role in the success of the new GM’s global business.”
“Any further actions relating to the longer term funding structure of GM Daewoo will be considered if necessary,” he added.
“With today’s news, GM has underlined its commitment to GM DAT and to Chevrolet in Europe and around the world,” said Wayne Brannon, head of Chevrolet Europe. “Over the past seven years, GM DAT has become an integral part of General Motors’ global engineering, design and manufacturing network.”
KDB had refused to take part, wanting a much larger rights offer. Shanghai Automotive Industry Corporation and Suzuki Motor Corporation, the other shareholders, also declined, according to AFP.
But GM and state-run KDB have failed to agree in talks about a possible one trillion won in extra financial support. The bank has said it could provide fresh loans if the US parent comes up with a long-term plan to improve the subsidiary’s competitiveness. GM Daewoo, hit by falling demand amid the global downturn, has already used up a $2bn credit line.
KDB had said it wanted the sum of the rights offering more than doubled and that it would not participate in the offering if GM did not meet its requests, such as sharing licenses for cars jointly developed.
“The money came from GM’s global operations,” GM Daewoo spokesman Kim Sung-soo told Reuters.
