hankyoreh

The GM Korea factory in Changwon

GM Korea borrowed money from GM Holdings, the automaker’s global holding company, at high interest rates of 4.8–5.3%, a report shows. GM Korea’s deteriorating financial structure has left it dogged by rumors that the company may pull out of South Korea. The subsidiary also reportedly paid 129.7 billion won (US$114.9 million) to GM Holdings over the past three years for unclearly defined “operational support expenses for top-ranked leaders.”

According to Bareun Party lawmaker Ji Sang-wuk’s analysis on Sept. 18 of a 2013-16 audit report for GM Korea, the subsidiary borrowed 2.4033 trillion won (US$2.13 billion) from GM Holdings, including 1.8875 trillion won (US$1.67 billion) at a 5.3% interest rate and 515.8 billion won (US$457 million) at 4.8%. As a result, GM Korea has shouldered 440 billion won (US$390 million) in interest payments alone over the four years since 2013.

The interest rates paid by GM Korea are over double the amount paid by South Korean automobile makers when procuring funds from domestic financial institutions. Hyundai and Kia have respectively obtained funds at rates of 1.49–2.26% and 0.19–2.5%; for Ssangyong, the rates have ranged from 0.3% to 3.51%. Renault Samsung adopts a zero-borrowing management approach.

“Despite its chronic deficit, GM Korea has continued making high interest payments to GM Holdings and expenditures for unclear purposes,” Ji commented, blasting GM Holdings as a “high-interest lender.”

In addition to its high interest payments, GM Korea also paid a total of 129.7 billion won (US$114.7 million) to GM Holdings between 2014 and 2016 in exchange for financial, funding, accounting, tax, and internal auditing support. Ji described the duties as “things that GM Korea has done independently since it was founded.”

“These expenditures make no logical sense,” he said.“As a result of this excessive and unclear spending, the Korea Development Bank hasn’t been able to conduct a proper audit, even though GM Korea has reached a state of capital impairment,” he added.

In response, GM Korea said it was “inappropriate to compare the capital procurement capabilities of GM Korea and Hyundai Motor, which differ in terms of financial soundness.”

“We borrowed from the headquarters because we can’t obtain a low-interest loan on the market,” it explained.

The subsidiary also said the “operational support expenses for top-ranked leaders” were “legitimate transactions between a multinational corporation and its South Korean subsidiary.”

“This was something decided on through normal board of director procedures, and no issue has been made of it in accounting audits,” it said.

By Choi Ha-yan, staff reporter

Please direct questions or comments to [english@hani.co.kr]