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GM Korea wants KDB to speed up inspection.

Criticism is growing over GM Korea calling for the Korea Development Bank (KDB) to start its due diligence on the company as soon as possible. The debt-ridden carmaker's position runs counter to earlier reluctance by GM's Detroit headquarters to disclose sensitive information to the state-run bank.

The KDB said it will look into GM Korea's high production costs that are allegedly caused by technology patent, labor, maintenance and finance costs. But the state-run bank is claiming the carmaker's Detroit headquarters is calling for a limited range of disclosures in the due diligence.

"GM Korea wants the due diligence to be completed within one or two months," said an official.

"In order for the KDB to carry out a thorough inspection of the company's operation, the demanded documents should be submitted to the bank."

The KDB said in mid-February that Samil PricewaterhouseCoopers would start the due diligence of GM Korea by the end of February to finish by the end of April, but the inspection has yet to start as the both sides seem to have failed to narrow the gap in the disclosure of documents.

GM Korea rebutted the bank's allegation, saying that it has and will fully cooperate with the government controlled bank's demands.

"GM Korea does not have the luxury of time," a company official said.

"It is an issue that determines the ultimate fate of the company. If we do not get financial support from the KDB soon, more people will lose their jobs. The Detroit headquarters is also committed to reviving GM Korea, and promised to fully cooperate with the KDB's demands."

He stressed the due diligence is even more essential for the carmaker to clear up other major issues such as wage negotiations and allocating new vehicle models as the company's future growth engines.

"Depending on the progress of the due diligence, the company's talks with its workers are expected to find a middle ground. Once GM Korea manages to reach an agreement on production cost reduction options, including a voluntary retirement program and freezing of wages, the Detroit headquarters will consider allocating new and promising vehicle models to its Korea operation," he said.

"So, there are still a number of hurdles. But they all start with the due diligence. It should start no later than this week."

GM and the government have discussed possible ways to turn around its loss-making affiliate since February, after the Detroit-based carmaker announced the closing of its Gunsan plant, one of its four factories here, by May.

GM, which owns 77 percent of GM Korea, added the remaining three plants would face the same fate unless its Korean operation becomes profitable.

"The government does not have much time either," said Kim Pil-soo, a professor of automotive studies at Daelim University.

"The deal with General Motors is very important for the Moon Jae-in administration and the fate of the ruling party in the June local elections, since about 150,000 jobs are at stake here. Three months may not be enough for full-scale due diligence."

In 2017, GM Korea produced 520,000 vehicles at its car plants, which have a combined capacity of 910,000. It sold 524,547 vehicles last year, down 12 percent from 2016.

GM Korea is estimated to have suffered losses of 900 billion won ($831.4 million) last year, bring its accumulated losses since 2014 to 3 trillion won.

The company announced last week that domestic sales in February dropped by 48.3 percent to 5,804 from the same month last year.
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Publication:The Korea Times News (Seoul, Korea)
Geographic Code:1U3MI
Date:Mar 5, 2018
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