Korea’s ministry of finance and economy has given GM Daewoo Auto & Technology Co. a windfall potentially worth tens of millions of dollars, Reuters reported.
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The news agency said that, under a plan approved during negotiations last year to create GM Daewoo, but never made public, the government said it will exempt the car maker from all corporate taxes for seven years after it returns to profitability.
The company will then pay only 50% of any due taxes for the following three years, the ministry of finance said, according to Reuters, which also noted that expatriate executives working for the company, such as CEO Nick Reilly, will receive similar tax breaks, though no details were given.
Reuters noted that, despite rising exports, GMDATCO has been unprofitable since its creation from the wreckage of bankrupt Daewoo Motor in October 2002 – the company expects to export 270,000 cars this year, many badged as Chevrolets or Suzukis, but sales at home remain weak.
Reuters also noted that, last month, Reilly said home-market sales would fall at least 35,000 units short of the company’s earlier forecast of 150,000 this year because of the country’s weakening economy – the company’s home-market share is about 9%.
“In a couple years, when we get up to very heavy capacity utilisation and we have gone through the heavy spending, we ought to be getting close to profitability,” Reilly reportedly said.
Reuters cited Reilly as saying that GM Daewoo plans to spend about $US450 million this year on new vehicles, a design centre, dealer networks and plant upgrades.
