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GM, South Korea reach agreement on $7.15B revamp package for local unit

General Motors Co. will be prohibited from cutting its 77% stake in GM Korea over the next five years and is required to keep its holding above 35% between 2023 and 2028 as part of a new agreement with the South Korean government to turn around the U.S. automaker's South Korean unit, The Associated Press reported.

South Korean Finance Minister Kim Dong-yeon said during a news conference that the agreement will ensure GM stays in South Korea for at least the next 10 years.

Seoul and the U.S. automaker agreed on a restructuring package for GM Korea worth $7.15 billion. Under the deal, state-run Korea Development Bank will inject $750 million of funding, while GM will lend the unit $3.6 billion for capital spending over the next 10 years and convert $2.8 billion of GM Korea's debt into equity, according to Reuters. The parties will sign a binding agreement on May 11.

GM also agreed to establish its Asia-Pacific headquarters in South Korea to oversee production, sales and technology development for the region, excluding China. In addition, the company will increase its purchases of parts from South Korean suppliers for its international operations from its current annual procurement of about $1.85 billion, Reuters reported.

As part of a preliminary agreement, local suppliers to GM and other South Korean automakers will receive funding worth a "combined tens of millions of dollars" from the government for the development of certain key automotive parts, including components for electric and self-driving cars, according to Reuters.

GM's regional headquarters was in Singapore, but the company reduced headcount at the office last year as part of its restructuring to focus on more profitable markets such as China and the U.S.

The U.S. automaker's South Korean unit has sustained significant losses for the past several years and the company decided to shut down one of its four local plants in May.