SEOUL, March 9 (Reuters) - General Motors confirmed details of a proposed investment in its loss-making South Korean business on Friday, but said it was subject to support from Seoul and GM’s Korean union. GM Korea said that without new funding from its major shareholders it would have a first quarter “cash crisis”.
Barry Engle, President of GM International, said in a company letter seen by Reuters, that the automaker would clean up GM Korea’s balance sheet by converting into equity $2.7 billion in debt held by General Motors itself.
Engle said GM would “fund its portion of the $2.8 billion in investment required to bring products to market and update the tooling and equipment to build them.”
The proposed plans are in line with details previously reported by Reuters.
GM Korea confirmed the content of the letter but said the carmaker’s further investments would depend on a deal between it and other parties including the government and the union.
“GM has said it will only provide additional funding if there is agreement on the necessary shared sacrifices with the union, the Government and the KDB,” GM Korea said in a statement.
KDB is South Korea’s state-run bank that owns a 17 percent stake in GM Korea, which said has approached five commercial banks to raise funding, but these has been declined.
Nearly two trillion won ($1.88 billion) of GM Korea’s loans to its parent are due by end-March or early April, according to its regulatory filing and the company.
KDB said that Engle met its chairman on Friday and agreed to start a due-diligence on the debt-ridden Korea unit next week. The South Korean government says this is a necessary step to decide whether to provide financial support. ($1 = 1,065.0700 won) (Reporting by Hyunjoo Jin, additional reporting and writing by Ju-min Park; Editing by Alexander Smith)