South Korea’s government is aiming to complete a due diligence process on GM’s Korean operations by early May as it weighs up financial support for GM Korea’s ailing operations.
“We aim to complete due diligence by the end of April, but expect the process to continue until early May,” state-funded Korea Development Bank (KDB) Chairman Lee Dong-geol told reporters, according to Reuters.
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According to the Reuters report, he also said due diligence was progressing and that GM was submitting more documents for review.
GM Korea is facing an increasingly urgent liquidity crisis after it failed to convince labour unions to support its restructuring plan by the end of last month.
In March, GM Korea told unions they needed to back its restructuring plan if urgently needed funding was to be made available by US parent company General Motors. Unions agreed to back a two year wage freeze and slashed bonuses, but only if the company reversed its decision to close the Gunsan plant
Now the loss making car maker is struggling to pay salaries while huge sums are also due this month to suppliers, for loan repayments to creditors and for early retirement payments to redundant staff. By some estimates, the company needs KRW1 trillion (US$937m) in cash to meet this month’s obligations.
In February, GM Korea said it would end production and close its Gunsan plant by the end of May 2018. “The Gunsan facility has been increasingly underutilised, running at about 20% of capacity over the past three years, making continued operations unsustainable,” the automaker said in a statement.
Gunsan includes an engine unit with capacity for 200,000 and a 260,000-unit car assembly plant curently making Chevrolet Cruze/Cruze Classic/Cavalier models.
The move will still leave loss-making GM Korea with a substantial manufacturing presence in South Korea – but further restructuring of operations is expected. Its main Bupyeong complex houses a 440,000 capacity car assembly plant producing the Buick Encore and Chevrolet’s Aveo/Sonic, Captiva and Malibu. Nearby components factories can make 300,000 manual transmissions and 570,000 engines a year.
See also: ANALYSIS – GM Korea’s future in the balance
