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GM throws a $6.4 billion buoy to its South Korean unit after years of losses.

Posted in News

General Motors Bails Out GM Korea For Billions
GM throws a $6.4 billion buoy to its South Korean unit after years of losses.

— General Motors says it will throw a $6.4 billion life preserver to its South Korean unit in an effort to keep GM Korea afloat in the midst of a sea of financial troubles.

The bailout will try to reverse net losses the past few years in South Korea as vehicle production dropped to just 520,000 cars. That's nearly half the vehicles GM Korea manufactured 10 years ago.

The word "bailout" is synonymous with General Motors as the automaker survives only because the U.S. government bailed out GM in 2008-2009 to the tune of $50 billion.

By the end, U.S. taxpayers lost more than $11 billion on the deal and the "New GM" went on to spend years ignoring defects in its ignition switches.

Those switches killed more than 120 people and injured nearly 300, with multiple lawsuits still working their way through the U.S. court system today.

GM told the South Korean government that 15 new models will allegedly be added to Korean assembly plants, facilities that will be updated over the next 10 years at a cost of $2 billion.

In addition to more than $6 billion direct from GM in the U.S., the Korea Development Bank (KDB) will add another $750 million because the bank owns 17 percent of GM Korea. General Motors owns 77 percent of the company and a Chinese company owns the remaining shares.

As part of the bailout agreement, GM will make South Korea the home of the automaker's Asia-Pacific regional headquarters originally based in Singapore.

South Korean officials say GM Korea's losses have been caused by increased costs for personnel along with decreased global exports, but agreements concerning labor strikes and plant closures have apparently been hashed out in a plan to cut costs over the next 10 years.

Ten years is also how long the automaker has promised to stay in South Korea.


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