General Motors (GM) Plans To Invest $2.8B In South Korea

Per Reuters, General Motors Company (NYSE:GM) has presented a plan to invest $2.8 billion over a period of 10 years to restructure its stressed South Korean operations. Additionally, the company has requested the South Korean government to inject funds for the investment through its state-run Korea Development Bank ("KDB"), which already holds a 17% stake in GM Korea.

The proposal is in addition to the company’s offer to convert around $2.2 billion of debt into equity, owed by its Korean operations, in exchange for financial support and tax benefits from the government.

These initiatives, to revive GM Korea, started after the Detroit-based automaker announced last week that it will shut down one of its four plants in South Korea as part of the restructuring of its business in Asia. (Read more: General Motors to Trim South Korea Business, Focus on Profit)

General Motors Company Price and Consensus

In a period of two years ending in 2016, the company’s Korea operations suffered a loss of approximately 1.9 trillion won. Further, in sync with General Motor’s recent decision to exit from unprofitable markets like Europe and emphasizing more on profitability and innovation than on revenues and volume have intensified problems for GM Korea.

Being a low-cost export hub, the company’s South Korean operations manufactured nearly a fifth of General Motor’s global output during its peak time. GM Korea was once a major manufacturer of the company’s Chevrolet models which were offered to the European market.

Price Performance

In the last six months, shares of General Motors’s stock have outperformed the industry it belongs to. The stock has rallied 15.5% compared with the industry’s 5.3% rise.

Zacks Rank & Other Key Picks

General Motors has a Zacks Rank #2 (Buy).

Other top-ranked stocks in the auto space are Navistar International Corporation (NYSE:NAV) , PACCAR Inc. (NASDAQ:PCAR) and AB Volvo (OTC:VLVLY) . Navistar sports a Zacks Rank #1 (Strong Buy), while PACCAR and Volvo carry a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Navistar has an expected long-term growth rate of 5%. In the last six months, shares of the company have jumped 28.1%.

PACCAR has an expected long-term growth rate of 10%. In the last six months, shares of the company have gained 7%.

Volvo has an expected long-term growth rate of 15%. Over a year, shares of the company have rallied 46.1%.

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