State-run Korea Development Bank (KDB), the second-largest shareholder of GM Korea, on Thursday officially raised concerns about the possibility of U.S. automaker General Motors Co. pulling out of the local market.
In its latest report submitted to the National Assembly on Thursday, KDB made public the possibility of GM deserting the Korean market, given deteriorated business conditions at home and abroad, impending termination of the ban on stake sales, and overall overseas streamlining of policy of the U.S. automaker. Rumors of GM’s exit spread after GM Korea CEO James Kim stepped down before his term ended in March next year.
KDB is the second-largest shareholder of GM Korea with 17.02 percent stake.
GM units including GM Investment Co. own 76.96 percent of the Korean operations.
GM Korea incurred 2 trillion won ($1.78 billion) worth of losses in the last three years and has completely fallen into a state of capital impairment after posting loss in the first quarter ended March this year, giving a good reason for the U.S. automaker to consider pulling out of Korea.
When GM acquired former Daewoo Motors in 2002, it promised to maintain management control for 15 years. The ban on stake sale will be lifted in October, giving the GM units choice to sell their shares in GM Korea.
KDB said it does not have any excuse to keep the automaker running its operation in Korea beyond that period.
KDB has the rights to veto matters raised as a special resolution by shareholders, such as on disposal or transfer of assets exceeding 20 percent of GM Korea’s total assets through an agreement between GM and other shareholders. KDB however cannot use its veto against management decision in GM Korea, in which it does not hold any debt obligation.
GM Korea, however, said that it has not heard of anything on the possibility of withdrawal from its GM headquarters. It declined to comment on the terms, citing confidentiality clause.
GM Korea accounts for 14 percent of Korea’s finished car sales, the third-largest after Hyundai Motor Co. and Kia Motors Corp. The automaker operates four manufacturing facilities in Bupyeong in Gyeonggi, Boryeong in South Chungcheong, Gunsan in North Jeolla, and Changwon in South Gyeongsang. About 16,000 employees work for GM Korea across the country, but the job losses could reach 300,000 when including subcontractors.
By Chung Seok-woo and Park Chang-young
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