South Korea may sign GM Korea funding deal by April 27

General Motors employees work at an assembly line of the company’s Bupyeong plant in Incheon. GM shocked South Korea in February with plans to close one local plant and leaving the fate of three others unclear. (Reuters)
Updated 17 April 2018
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South Korea may sign GM Korea funding deal by April 27

  • GM proposed in February an investment of $2.8 billion into its money-losing South Korean operations over 10 years
  • GM Korea and its union plan to hold another round of talks on a restructuring deal on Wednesday morning

SEOUL: Korea Development Bank (KDB) may sign a preliminary agreement by April 27 to financially support General Motors Co’s troubled South Korean unit, provided interim due-diligence on the unit is satisfactory, the chairman of the state-run lender said on Tuesday.
GM proposed in February an investment of $2.8 billion into its money-losing South Korean operations over 10 years, days after announcing a sweeping restructuring. It has asked Seoul to provide a share of the funds for the overhaul.
The US automaker owns 77 percent of its South Korean unit, GM Korea, while KDB owns 17 percent. GM’s main Chinese partner, SAIC Motor Corp. Ltd, controls the remaining 6.0 percent.
Lee Dong-gull, chairman and CEO of KDB, told Reuters the bank may offer around 500 billion won ($468.42 million), proportional to its 17 percent stake in GM Korea, to help fund GM’s pledged $2.8 billion investment.
This is the first time KDB has offered a time-frame for a decision of whether to financially back GM Korea. The bank and government officials have so far been non-committal.
GM’s president told Reuters last week that common ground must be reached on a long-term restructuring of GM Korea by this Friday, and if there was none, the operation would likely seek bankruptcy protection.
GM shocked South Korea in February with plans to close one local plant and leaving the fate of three others unclear. It is seeking government funding and incentives as well as labor cost cuts to save the unit, which in 2017 posted a net loss of $1.1 billion, its fourth straight year in the red.
“If GM injects equity into the unit, we will inject equity. If GM extends loans to the unit, we will extend loans as well,” Lee said, adding KDB prefers to take part in a rights offering rather than lending to the unit.
“We may be able to reach a very meaningful agreement by April 27, whether it is a verbal promise or conditional MOU,” he said, referring to a memorandum of understanding (MOU).
The KDB chairman said its interim due diligence report on GM Korea is scheduled to be out on Friday, but GM Korea has not so far submitted sufficient documents for South Korea to assess its financial viability.
He said the bank would be able to sign a legally binding deal with the US automaker only after a final report is out in late April or early May.
“We are in continued discussions with the KDB and the government with intent to inject new funds and convert debt into equity,” a GM Korea spokesman said.
Lee said KDB would have no choice but to consider taking “appropriate legal action” should the US automaker opt to liquidate its South Korean unit without consulting the bank.
Lee said GM should offer a long-term commitment to South Korea to get government support and recover public trust.
He said many South Koreans believe that GM may eventually leave South Korea when government subsidies dry up, as the US automaker did in Australia and Europe.
“They have to show a commitment to remaining as a good corporate citizen,” Lee said.
“What GM really needs to know is that anti-GM sentiment is very strong in South Korea. I told GM that they need to make me feel comfortable before I can make some kind of decisions.”
Lee had a series of meetings with Barry Engle, head of GM’s international operations, who visited South Korea to discuss a restructuring plan with the government and the GM Korea union.
GM Korea and its union plan to hold another round of talks on a restructuring deal on Wednesday morning, a union spokesman said on Tuesday. “We are trying to resolve the problem with a dialogue,” he said.
GM Korea was one of GM’s major manufacturing and engineering bases in Asia after its 2002 purchase of failed South Korean car maker Daewoo Motors. But the unit has struggled in recent years since GM pulled its Chevy brand from Europe, hitting exports to GM Korea’s major market.
“The mutual trust hit rock bottom. We have to enhance trust and this will not happen overnight,” Lee said.


French state-owned bank drops plan to aid trade with Iran

Updated 52 min 4 sec ago
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French state-owned bank drops plan to aid trade with Iran

  • US-imposed sanctions sanctions iare making trade with Iran increasingly difficult for European companies - such as Volvo
  • US is renewing sanctions on Iran after withdrawing from a nuclear deal forged in 2015 between Tehran and world powers

PARIS: French state-owned bank Bpifrance has abandoned its plan to set up a mechanism to aid French companies trading with Iran, in the face of US sanctions against Tehran.
Earlier this year, the bank had said it was working on a project to finance French companies that wished to export goods to Iran despite US sanctions.
“It’s put on hold,” said Nicolas Dufourcq, Bpifrance’s chief executive. “Conditions are not met (...) Sanctions are punitive for companies.”
Bpifrance was working on establishing euro-denominated export guarantees to Iranian buyers of French goods and services. By structuring the financing through vehicles without any US link, Bpifrance thought it was possible to avoid the extraterritorial reach of US legislation.
Dufourcq’s latest comments show how the scope of the sanctions is making trade with Iran increasingly difficult for European companies.

Swedish truckmaker Volvo has been forced to stop assembling trucks in Iran as it can no longer get paid with US sanctions taking bite.
Volvo spokesman Fredrik Ivarsson said due to the sanctions Volvo could no longer get paid for any parts it shipped and therefore had taken the decision to not operate in Iran.
"With all these sanctions and everything that the United States put.. the bank system doesn't work in Iran. We can't get paid... So for now we don't have any business (in Iran)," he said.
The US is renewing sanctions on Iran after withdrawing from a nuclear deal forged in 2015 between Tehran and world powers. Washington reimposed some of the financial sanctions from Aug. 6, while those affecting Iran’s petroleum sector will come into force from Nov. 4.
Even though several European countries have said they are seeking to protect their companies from the sanctions, several major companies including oil company Total, Air France-KLM and British Airways have announced they would suspend activities in Iran.
German officials have in recent weeks advocated for the creation of an independent system for cross-border payments to make trade with Iran possible even with the US sanctions.
European Union diplomats have said US President Donald Trump’s positions on trade and on Iran were fueling a rethink about the EU’s dependency on the US financial system.
However, European countries appear to be struggling to find or agree on effective options to tackle the issue.