General Motors Co. has decided to extend the loans of its troubled South Korean unit while dropping its request to take a local plant as collateral for the debt.

At GM Korea’s board meeting on Friday, the Detroit-based automaker agreed to extend the 722 billion won ($669.4 million) of debt maturing in February until due diligence is completed.

The Korean government earlier said it will decide on the scope of its financial support for the money-losing Korean unit after due diligence is over.

The state-run Korea Development Bank (KDB), GM Korea’s second largest shareholder and main creditor, had reportedly called for lower interest rates on the debt, which currently run at 5.3 percent, but was turned down. An additional 988 billion won of debt is also due in early April.

Meanwhile GM withdrew its demand to put up a factory in Bupyeong as collateral for the unpaid debt. KDB had been fiercely against the decision, having exercised its veto power against the same motion in 2015 and 2016. The bank had been wary of the move as it would allow GM to liquidate the plant and claim the sale proceeds if the Korean unit ever went bankrupt.

GM’s move is widely seen as a conciliatory gesture to hold off on contentious decisions in a joint effort with Seoul to turn around its financially-strapped Korean unit. The Korean government on Thursday announced it would be willing to support GM’s funding plan of $2.8 billion over the next 10 years but only if the company shows the will and actions to normalize its Korean operations.

By Lee Seung-hoon and Kim Hyo-jin

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]