State-run Korea Development Bank (KDB) on Monday embarked on due diligence on GM Korea to study its cost structure before determining whether to grant financial aid and tax breaks to help keep Korea’s third largest automaker in business.

“We have reached a general consensus on due diligence conditions although there still are some differences in opinion,” KDB Chairman Lee Dong-gull told reporters after a kick-off meeting with GM officials at GM Korea’s Bupyeong plant. He also added that Barry Engle, GM’s head of international operations, pledged in a meeting with him last week to cooperate with KDB by providing necessary information based on mutual trust.

The state lender plans to focus on examining the cost structure of the Korean unit including its transfer price, loans from the headquarters, fees to the headquarters, royalty payment and labor cost during due diligence.

After announcing its plan last month to shut down one of its four assembly lines in Korea in May and decide the fate of the remaining plants within weeks, the Detroit-based auto giant proposed to the Korean government to provide fresh funding of $2.8 billion to finance allocation of two new vehicle models and convert $2.7 billion debt into equity to clean the company’s balance sheet with overwhelming debt. It asked KDB holding a 17 percent stake in GM Korea to participate in the scheme, but the lender has been maintaining that it would wait until the due diligence is over to determine whether to offer help.

GM Korea this week will apply for designation of its plants in Bupyeong and Changwon as foreign investment zones with host Incheon city and South Gyeongsang Provincial governments. Once categorized as free economic zone, the two plants are eligible for a 100 percent tax exemption for the first five years and 50 percent for the next two years.

By Lee Seung-hoon and Choi Mira

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