General Motors, Seoul agree to $7 billion bailout for South Korea unit

Under the deal, GM will remain in South Korea for at least 10 years, with KDB regaining veto power over GM’s rights to sell assets in the country. (Reuters)
Updated 10 May 2018

General Motors, Seoul agree to $7 billion bailout for South Korea unit

SEOUL: US auto giant General Motors and Seoul have agreed on a multi-billion-dollar bailout for the firm’s troubled South Korean unit, a government minister said Thursday.
GM is the largest US automaker and one of the biggest players in the global industry but its South Korean subsidiary is loss-making and has seen production fall by almost half in the last decade.
Earlier this year GM Korea announced a plan to shut down Gunsan, one of its four plants in the country, and lay off some 2,000 personnel, sparking a prolonged strike and negotiations with the authorities.
Workers and management reached a deal last month on job and welfare payment cuts and a wage freeze across the firm, paving the way for Thursday’s announcement.
The US parent will inject $6.4 billion into GM Korea and the state-owned Korea Development Bank (KDB) will plow in another $750 million, finance minister Kim Dong-yeon told journalists.
GM will invest $2 billion in facilities over 10 years and spend $1.6 billion on corporate restructuring and operational costs.
An existing $2.8 billion loan to GM Korea will be converted into preference shares, saving the unit 150 billion won ($110 million) in interest every year.
GM currently owns 77 percent of GM Korea and KDB has a 17 percent stake, with the remaining shares held by China’s SAIC Motor.
The firm was rebuilt from the wreckage of local automaker Daewoo, which went bankrupt in 2000.
But production has fallen from 940,000 cars in 2007 to 520,000 last year, when GM Korea lost some $139 million in South Korea.
“We hope that GM Korea carries out this bailout package faithfully so that it may become a success story,” Kim said.
“If GM Korea fails to turn around, 150,000 jobs will be threatened and some 3,000 suppliers will be in difficulties,” he added.
Under the deal, GM will remain in South Korea for at least 10 years, with KDB regaining veto power over GM’s rights to sell assets in the country.
GM also pledged to allocate two new models to its Korean plants.
In its first-quarter results last month GM took a $942 million hit for the cost of closing the Gunsan facility.


Saudi defense contractor to invest up to $16 million to further localize services

Updated 18 November 2019

Saudi defense contractor to invest up to $16 million to further localize services

DUBAI: Saudi-based defense contractor Middle East Propulsion Company (MEPC) plans to invest between $13 million and $16 million over the next two years to build test cells for aircraft engines and establish new production lines.
These expansion activities should complement the company’s objective to localize high-tech repairs and combine them in one roof for the Saudi defense ministry, which is a major customer, CEO Abdullah Al-Omari told Arab News.
Instead of sending aircraft engines and engines modules overseas for further servicing, thus take up more time before military assets return to actual service, localization not only cuts the turn-around period but also reduces Saudi government spending for the repairs.
“We have accomplished more than 1,600 engine and engine modules [since 2001, they] have been maintained totally in Saudi Arabia,” Al-Omari said at the sidelines of the Dubai Airshow. “The engines consume 45 percent of what you spend on aircraft.”
The company works on 150 to 160 engines and engine modules every year.
MEPC is the first specialized MRO (maintenance, repair and overhaul) company operating in the Middle East, according to its website. It has invested over $26 million during the previous two years for the localization of its MRO services.
“We used to send these parts to outside, it takes 6 months to 24 months sometimes … in case of the Apache engines, minimum turn around is 24 months,” Al-Omari said, but their localization efforts have greatly improved their capability by cutting the turn-around period to only 150 days.
The speed at which MEPC is able to repair engines and modules, boosts the readiness of Saudi military, Al-Omari added.
The company is in talks with major defense contractors, including Honeywell for the Abrams talks and GE T700 engines, for possible tie-ups to further improve their capability, he said.
“Currently there is a potential with the Kuwait army to provide them with similar services [being delivered to the Saudi defense ministry],” Al-Omari said, and expects that cooperation would start “within the next two years or so.”