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GM Korea to seek shareholders' approval for spinoff plan

All Headlines 11:36 October 05, 2018

SEOUL, Oct. 5 (Yonhap) -- GM Korea Co., the South Korean unit of General Motors Co., said Friday it will seek approval from shareholders on a plan to spin off its design and engineering divisions into a separate R&D-focused corporation.

On Thursday, GM Korea's board of directors agreed to integrate a design center, a research center and a powertrain division in Bupyeong, just west of Seoul, into a separate business entity as part of its restructuring efforts, a company spokesman said over the phone.

GM Korea plans to set up an R&D company in order to carry out design and development work for GM's best-selling midsize sport utility vehicles, the company said.

GM Korea plans to obtain approval at the shareholders meeting set for Oct. 19.

But the company's union sees the move as an initial step to maintain the new corporation as one of GM's R&D bases, while selling or shutting down its production facilities in the country in the long term.

It remains to be seen whether the planned shareholders' meeting will take place, as the state-run Korea Development Bank (KDB) has filed an injunction against the shareholders meeting with a local court.

The company's board is composed of seven GM Korea executives and three officials from the KDB, the main creditor bank of the carmaker. The three KDB directors opposed the spinoff plan, he said.

In May, GM and the KDB, the two biggest shareholders in GM Korea, signed an agreement to permit a combined 7.7-trillion-won lifeline -- 6.9 trillion won from GM and 810 billion won from the KDB -- to keep the loss-making Korean unit afloat.

In the same month, the Detroit-based carmaker shut down one of its four car assembly plants in Korea due to its low utilization rate of 20 percent.

GM holds a 77 percent stake in GM Korea, with the KDB and SAIC Motor Corp. controlling 17 and 6 percent, respectively.

In the 2014-2017 period, GM Korea posted 3.134 trillion won (US$2.9 billion) in accumulated net losses due to a lack of new models and weaker demand.

GM Korea to seek shareholders' approval for spinoff plan - 1

kyongae.choi@yna.co.kr
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