SEOUL (Reuters) - General Motors Co GM.N and the South Korean government are considering raising the size of their investment in the U.S. automaker's South Korean subsidiary from a previously proposed $2.8 billion, a senior government official with direct knowledge of the matter said on Wednesday.
GM President Dan Ammann will be also visiting South Korea on Thursday to meet lawmakers and government officials including Korea Development Bank Chairman Lee Dong-gull to discuss investment plans, people familiar with the matter told Reuters.
GM Korea averted bankruptcy on Monday after striking a last-minute wage deal with its labor union. Its parent has been in talks with South Korea’s government on providing financial support, and KDB’s Lee previously told Reuters a preliminary deal on any assistance is likely to be signed on Friday.
GM had said it would contribute its “portion of the $2.8 billion investment”, enabling two new sport utility vehicles to be built in South Korea. GM’s investment was to be over a 10-year period and was conditional on the company winning union concessions and getting government financial support.
State-run KDB previously said it may contribute about 500 billion won ($463.13 million), proportional to its 17 percent stake in GM Korea, to the total investment.
“GM has expressed its intention to increase the size of new money injection from its previous plan to normalize management, and asked the KDB to expand its funding proportional to its stake,” the person told Reuters, requesting anonymity as the matter was confidential.
The person declined to comment on the size of the increased investment.
South Korean online media MoneyToday reported on Wednesday that GM said it would expand the investment to more than 4 trillion won, meaning KDB’s spending would rise to 700 billion won.
GM and KDB declined to comment when contacted by Reuters.
GM in February unveiled a major restructuring plan for the money-losing unit, involving shuttering one of its four South Korean plants and voluntary redundancies for 2,600 workers.
GM Korea has since been receiving applications for a fresh voluntary redundancy program targeted at mainly the remaining 680 workers at the Gunsan factory which faces closure by May.
Some 240 people from Gunsan and other factories have applied for the program as of Wednesday evening, a union source told Reuters.
GM Korea last week said it would file for bankruptcy protection should it fail to gain concessions from the union by its extended deadline of Monday evening.
An hour before the deadline, the union reached a preliminary deal to freeze base wages, skip bonuses this year and trim benefits, subject to a member vote on Wednesday and Thursday.
($1 = 1,079.6200 won)
Reporting by Shinhyung Lee and Hyunjoo Jin; Editing by Muralikumar Anantharaman and Christopher Cushing
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