Unionized workers at the carmaker vowed to stage a sit-in protest, accusing the company of trying to shift the blame onto them for years of losses.
Amid aggravating confrontations, some raised suspicions the US carmaker has intentionally inflated the losses of its operations here, siphoning off cash in the form of interest payments and research and development investments.
Local critics suspect that GM may have taken more than 3 trillion won ($2.78 billion) from its Korean arm since the acquisition in 2002 under the pretext of interest, car parts, research and development costs and dividends. It has so far invested 1 trillion won in the local unit, they claimed.
The GM headquarters loaned GM Korea around 2.4 trillion won at an interest rate of 4.7 to 5.3 percent -- significantly higher than commercial rates. The headquarters may have pocketed around 462 billion won in interest from the Korean arm from 2013 to 2016, they added, quoting its financial sheets.
GM Korea also had to buy car parts from the US headquarters at higher prices and sold cars here at lower prices. The costs in proportion to sales were above 92 percent for GM Korea, compared to the 80 percent of other automakers.
GM Korea also gave 1.8 trillion won from 2014 to 2016 to its headquarters on the ground of research and development spending.
“The R&D costs were too high given the number of new cars released here. Based on strategic bookkeeping, GM took all the money from GM Korea and now is asking for money from the Korean government,” said Lee Hang-koo, a senior researcher at the Korea Institute for Industrial Economics & Trade.
Amid growing skepticism, the Financial Supervisory Service has started to look into the financial sheets of GM Korea. Authorities, however, have found no wrongdoings so far, they said.
Announcing the decision to close the plant in Gunsan, North Jeolla Province, GM Korea said it was the “first step” of “necessary” restructuring. The fate of the remaining operations are to be decided within weeks. The carmaker has reportedly asked the government to increase capital in its operation. The state-run Korea Development Bank is GM Korea‘s second-largest shareholder, with 17.02 percent stake.
Meanwhile, US President Donald Trump has taken the credit for GM’s plant shutdown in Korea himself, on the assumption the US carmaker will bring a plant back to Detroit. He also hinted at the possibility of scrapping the free trade deal with Korea on the grounds of trade imbalance.
“GM Korea is going to move back to Detroit. You don’t hear these things except for the fact that Trump became president. Believe me. You wouldn’t be hearing that, so they’re moving back from Korea to Detroit,” Trump said during a trade-related meeting at the White House on Tuesday, hinting his “America First” governance agenda had affected the closure of the plant.
During the meeting, Trump again stressed the trade imbalance with Korea, referring to the free trade agreement.
“We have a very bad trade deal with Korea. Very, very bad trade deal,” he said. “We’ll either negotiate a fair deal or we’re going to terminate the deal.”
The two nations are now renegotiating the revising of the free trade agreement that took effect in 2012, upon the Trump administration’s call last year on the grounds of trade imbalance.
By Shin Ji-hye (email@example.com)