Initial Bailout Funding Deal for GM Korea Likely This Week

General Motors Co. expects before the end of this week to sign a deal with Korea Development Bank to provide GM Korea with a KDB bailout loan worth 500 billion won ($465 million).

KDB owns 17% of GM Korea. The bank’s loan, which is contingent upon a positive due diligence report this week, would equal 17% of the $2.8 billion investment GM has pledged to revive its Korean unit over 10 years.

GM also is expected to convert $2.7 billion in debt owed by GM Korea into equity. The move will dilute KDB’s ownership share to less than 1%, giving it no influence on the carmaker’s future business decisions, a KDB official tells the Yonhap news service.

Yonhap says GM promises to add two new crossover models and maintain a combined annual production capacity of 500,000 vehicles at three factories in Korea. The company announced in February that it intends to close a fourth facility, an assembly plant in Gunsan, next month.

The bailout plan hinges upon GM Korea’s union members ratifying a tentative deal to grand wage and work rule concessions as their contribution to the company’s revival. A vote on the proposal will be held this week on Wednesday and Thursday.