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GM Korea to apply for designation of foreign investment zones

All Headlines 21:40 March 08, 2018

SEOUL, March 8 (Yonhap) -- The Korean unit of General Motors Co. will ask the South Korean government to designate its factory sites as foreign investment zones that would make the automaker eligible for seven years of benefits to help its turnaround plan, Seoul's commerce ministry said Thursday.

GM Executive Vice President Barry Engle discussed GM Korea's restructuring plan with senior officials from the commerce and finance ministries as well as the financial regulator.

Engle, who oversees all GM operations outside North America and China, made his fourth visit to South Korea in just two months as the Detroit-based automaker mulls the fate of its Korean operation after deciding to close its underutilized Gunsan factory by May.

GM has three other factories in Bupyeong, located in west of Seoul, and in Changwon on the nation's southeast.

The Korean government has said it will decide whether to provide the financial aid to the automaker's turnaround plan after looking into GM Korea's financial situation.

"GM officials said working-level talks with the Korean government have made some progress and hoped to begin due diligence on GM Korea as soon as possible," the Ministry of Trade, Industry and Energy said in a release. "GM disclosed its plan to submit an application for designation as a foreign investment zone for its factory sites along with its new investment plan in South Korea at an earlier date."

To become foreign investment zones that would eligible for corporate tax benefits for seven years, companies should invest over US$30 million for manufacturing and $2 million in research and investment and meet other requirements.

While GM Korea currently falls short of the requirements, Seoul officials earlier said they will consider the option if the automaker makes a long-term commitment to Korean businesses by producing a sizable number of new models in local production lines.

GM has proposed a $2.7 billion debt-for-equity swap and $2.8 billion in investment over the next 10 years in return for financial aid through the state-run Korea Development Bank (KDB), which holds a 17 percent stake in GM Korea, and other tax benefits.

As a way to maintain the Korean business, GM has offered to produce two new models in South Korea to secure a production capacity of about 500,000 units per year.

Last year, GM Korea produced 520,000 vehicles at all its car assembly plants in Asia's fourth-largest economy. The company has a combined annual capacity of 910,000 units.

ejkim@yna.co.kr
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