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S Korea to provide $3 bn in financial support for troubled auto suppliers

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SEOUL: South Korea unveiled a policy package to support its embattled car parts makers industry that includes providing financial support worth over 3.5 trillion won ($3.10 billion) and encouraging the use of electric cars.


As part of its efforts to provide liquidity, South Korea will launch a new credit guarantee programme for bonds worth 1 trillion won ($884.96 million) issued by the suppliers, using contributions from the government and car makers, the industry ministry said in a statement on Tuesday.


And the government plans to extend the maturity of loans worth about $1 billion by one year made to local suppliers of US automaker General Motors’ South Korean unit, it added.


The government has previously flagged the package of incentives but unveiled the details only on Tuesday.


South Korean auto industry associations welcomed the government’s support plan.


“It is a very timely measure in the current situation where the auto industry’s crisis is getting real and the number of suppliers in management crisis due to lack of finances and low utilisation rates is rising fast,” the Korea Automobile Manufacturers Association and the Korea Auto Industries Coop Association said. The auto components industry is crucial to the South Korean economy, making up 7 per cent of its gross domestic product. It employs 235,000 people, about 7 per cent of the manufacturing sector, according to the ministry.


Creating jobs is a key pledge of President Moon Jae-In’s administration. — Reuters


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