Korea Development Bank (KDB)'s chairman has told Reuters the bank may sign a preliminary agreement by 27 April to prop up ailing General Motors Korea provided interim due diligence on the unit is satisfactory.
The news agency said this was the first time KDB had offered a timeframe for a decision on whether to financially back GM Korea, in which the state run lender has a 17% stake. The bank and government officials have so far been non-committal.
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Reuters noted GM proposed in February an investment of US$2.8bn over 10 years, days after announcing a sweeping restructuring. It has asked the South Korean government to provide a share of the funds.
GM itself owns 77% of GM Korea while its main Chinese partner, SAIC Motor, controls the remaining 6%.
KDB may offer about KRW500bn ($468.42m), proportional to its stake, to help fund GM's pledged investment in the unit, KDB chairman and CEO Lee Dong-gull told Reuters.
GM's president told Reuters last week 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.
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By GlobalData"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 27 April, whether it is a verbal promise or conditional MOU," he said.
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 told Reuters 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.
"We are in continued discussions with the KDB and the government with intent to inject new funds and convert debt into equity," a GM Korea spokesman told the news agency.
Lee told Reuters KDB would have no choice but to consider taking "appropriate legal action" should the automaker opt to liquidate its Korean unit without consulting the bank.
Lee said GM should offer a long term commitment to South Korea to get government support.
He told Reuters many South Koreans believe GM may eventually leave South Korea when government subsidies dry up, as the US automaker did in Australia and Europe.
GM has also recently abandoned its South African operations to Isuzu and cut back India to an export only production site with no more new car sales.
"They have to show a commitment to remaining as a good corporate citizen," Lee told Reuters.
"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."
Reuters said Lee had a series of meetings with Barry Engle, head of GM's international operations, who visited South Korea to discuss a restructuring plan with the government and the GM Korea union.
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.
GM Korea and its union plan to hold another round of talks on a restructuring deal on Wednesday morning, a union spokesman told Reuters. "We are trying to resolve the problem with a dialogue."
