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Automobile

Seoul asks GM to act responsibly in restructuring GM Korea

Finance Minister Kim Dong-yeon calls on all stakeholders to share burden

SEOUL -- The South Korean government demanded on Thursday that General Motors take greater responsibility for turning around the U.S. automaker's ailing local unit, GM Korea, where 16,000 workers face an uncertain future.

Finance Minister Kim Dong-yeon said that as the unit's main shareholder GM should act responsibly and keep the Incheon-based automaker afloat. He said that all stakeholders, including shareholders, creditors, and the labor union, should share the burden of restructuring.

Kim held a press briefing following a meeting in Seoul on Thursday morning between First Vice Finance Minister Ko Hyoung-kwon and Barry Engle, president of GM International. The meeting was requested by GM. 

Engle has also met Industry Vice Minister Lee In-ho, and Lee Dong-gull, the chairman of state-run Korea Development Bank (KDB), in recent days.

Kim said GM needs to create a long-term plan for GM Korea's survival. The government is the second-largest shareholder, holding a 17% stake through KDB.

"We offered our ... principles to GM, and the company determined that they are reasonable," Kim told reporters. He added that GM had promised to help KDB with due diligence, and wanted it completed as soon as possible. 

GM has promised to submit its plan to normalize the South Korean unit through an official channel soon, according to the finance ministry. Both parties, it said, agreed that KDB should conduct due diligence on the troubled GM unit. 

KDB has selected Samil PwC to do the work. The company is the local affiliate of PricewaterhouseCoopers, and the largest accounting and consulting firm in the country.

"We think there have been improvements in our talks with the government," said Park Hae-ho, a GM Korea spokesman."We agreed to continue to follow up the issues."

Park said Samil started work on Thursday, and details of the government's financial support will be reviewed when that is completed. 

The government intervention came a week after GM announced that it planned to close its Gunsan plant by the end of May. It has been running at about 20% of capacity for the past three years. The automaker also plans to restructure production lines in Incheon, Changwon, and Boryeong, with major layoffs. 

Some industry observers have warned against injecting more money into the company. "I am against the government supporting GM financially because it is [the automaker's] own problem," said Chung Sung-yop, an analyst at Daiwa Capital Markets. "I don't think GM will pull out of the Korean market abruptly."

GM has been busy dealing with its underperforming businesses around the world, and is now focused on resolving problems in South Korea. Under Chief Executive Mary Barra, the U.S. carmaker has pulled out of several global markets, including Europe and Australia, to focus on the two countries in which it sells most: the U.S. and China.

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