GM seeks tax benefits in S. Korea to ease liquidity crunch

By Lim Chang-won Posted : April 12, 2018, 18:05 Updated : April 12, 2018, 18:05

[Aju News DB]


SEOUL -- The South Korean branch of General Motors has applied for government approval to designate its factory sites as foreign investment zones as negotiations with unionized workers on a cost-cutting rehabilitation package remained bogged down.

The Ministry of Trade, Industry and Energy said Thursday that it has received GM Korea's official request for the designation of foreign investment zones covering two factories in Bupyeong, west of Seoul, and in the southern city of Changwon to receive corporate tax benefits.

companies should invest over US$30 million for manufacturing and $2 million in research and investment and meet other requirements. Companies in the special zone are exempted from corporate taxes in the first five years and get 50 percent tax deductions in the next two years.

However, Minister Paik Un-gyu showed a lukewarm response, saying GM should give its outright long-term commitment to doing its business in South Korea such as an investment in new technologies related to next-generation cars.

"There are a lot of things to consider, such as job creation and new technology, but we are asking them to bring more things about new technologies," he said, citing autonomous vehicles or future cars that could keep GM Korea running for the next five to 10 years.

To become foreign investment zones, companies should invest over 30 million US dollars for manufacturing and two million dollars in research and investment. Paik stressed the government would not put GM Korea's request on the table if negotiations with union leaders broke down.

Korea Development Bank (KDB), which holds a 17 percent stake in GM Korea, has been hesitant to inject new money into the troubled carmaker. GM has pressed unionized workers to agree on a cost-cutting rehabilitation package, but union leaders opposed layoffs for the next 10 years.

GM Executive Vice President Barry Engle has suggested GM Korea needs some 600 million US dollars by the end of April for debt payment and retirement bonuses. The American company described its decision on February 13 to close one plant in Gunsan by the end of May as inevitable for the restructuring of its global business. GM officials complained about excessive demands and union activities by workers.

 
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