General Motors Co. has proposed a $2.8 billion injection of fresh funds into its South Korean unit over the next 10 years as the automaker discusses its restructuring plans with the government in Seoul, Bloomberg News reported, citing Hong Young-pyo, a lawmaker from South Korea's ruling party.
The new investment will be used for the production of new models, research and development, renovation and the revamp of GM's struggling South Korean unit which has debt of about 3 trillion won, Hong said.
A spokesperson at GM Korea confirmed the product plan for the business, saying it will be announced in March and will require "a significant amount of spending," Bloomberg News reported.
The spokesperson did not specify how much financial backing GM is seeking from South Korea to fund the investment plan. Hong, however, said the amount is expected to be about 500 billion won.
Hong also said that the automaker is considering a $2.7 billion debt-for-equity swap for GM Korea. Earlier, Reuters reported that GM had proposed converting about $2.2 billion in debt owed by its South Korean business into equity. In return, the Detroit automaker wants financial support and tax benefits from Seoul.
Meanwhile, South Korea's trade minister said the government needs to look first into GM's "opaque" management in the country before it could give the green light to the company's investment proposal, Reuters said in a separate report.
"By opaque we mean the high rate of profits to raw material costs, interest payments regarding loans and unfair financial support made to GM's headquarters," trade minister Paik Un-gyu was quoted as saying by Reuters.
On Feb. 12, GM Korea said it will shut down its Gunsan facility by the end of May as it decides on the fate of its three other South Korean plants.
As of Feb. 20, US$1 was equivalent to 1,073.30 South Korean won.