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GM Korea’s production plant in Bupyeong

The Korea Development Bank (KDB), GM Korea’s second-largest shareholder, made a decision on Dec. 26 to disburse the balance of 400 billion won (US$350 million) from the 800 billion won (US$750 million) it pledged to invest in the automaker last May contingent on management normalization.

While legal action by the KDB has brought a temporary halt to GM Korea’s spin-off plans for a separate R&D corporation plans after reawakened fears of GM’s withdrawal from South Korea, the bank’s latest move suggests it is now pursuing a way through talks with an unbending GM.

On Dec. 13, GM Korea announced a decision on a third party-allocated recapitalization to procure 404.5 billion won (US$358.2 million) in facility funds. The KDB’s investment is to take the form of 11,906,881 shares of GM Korea preferred stock allocated at a rate of 33,932 won (US$30.05) per share. Its ownership of common stock, which is tied to voting rights, is to remain unchanged.

The KDB’s contract with GM originally had the end of December as the deadline for the bank to disburse additional funds to GM Korea. In a parliamentary audit and other venues, KDB chairman Lee Dong-gull maintained that the additional payout before the deadline was inevitable unless the parties were willing to accept a breach of the management normalization contract. But with the conflict over the corporate split intensifying, critics increasingly contended that KDB was paying out taxpayer money while allowing itself to be manipulated by GM.

In response, GM warned that failure to disburse the funds could lead to a breach of the contract, while GM International President Barry Engle stressed the need to proceed with the court-halted corporate split in a recent series of meetings with the KDB chairman and politicians. The KDB appears to have reached the conclusion that the investment needs be paid to GM Korea as originally planned for now, while the bank looks for a way out through negotiations with GM.

In a statement the day before, the KDB said it was “holding discussions while insisting on principle on protections of our rights as a shareholder and development of a plan to ensure GM Korea’s sustainability.”

“We have received business plan documents, and an expert organization has been commissioned to examine them,” it said.

While it added the caveat that the materials were inadequate and additional information had been requested, the bank’s message signaled that it has begun a full-scale examination after receiving at least a portion of the documents to determine whether the corporate split will be good or bad for GM Korea’s future development.

By Jung Se-ra, staff reporter

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