GM signs long-term growth plan for S.Korea auto unit

14:16 | 08/12/2010
US automaker General Motors Wednesday signed an agreement with Korea Development Bank (KDB) for the long-term development of its South Korean operation GM Daewoo Auto and Technology, KDB said.

State-run KDB said the agreement will require the US firm to guarantee redemption of GM Daewoo's preferred shares held by local creditors.

The Detroit-based auto giant will also share licences with its South Korean unit for vehicles they jointly develop, the bank said in a statement.

KDB has a 17 per cent stake in GM Daewoo, South Korea's fourth-largest automaker, following GM's 70.1 per cent stake.

Under the agreement, KDB will also have a greater say in GM Daewoo's management with the appointment of three outside directors to the Incheon-based automaker's board.

KDB will have veto rights over GM Daewoo's management decisions. As part of the new arrangements, the stake limit for this right was lowered to 15 per cent from the previous 28 per cent.

"I am delighted that the agreement reassured us about GM's determination to support GM Daewoo," the statement quoted KDB chief Min Euoo-Sung as saying.

GM Daewoo was created in 2002 when GM took over Daewoo Motor, the carmaking unit of the now-defunct Daewoo Group.

But GM Daewoo saw its sales tumble amid currency-related losses and a global economic slump that cut demand.

Its domestic market share fell to 7.9 per cent last year from 9.6 per cent in 2008 amid the downturn.

KDB had for months pressed GM to show a firm long-term commitment to its South Korean unit to ensure its financial and business viability.

AFP

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