Citing creditor bank officials and industry sources, Asia Pulse reported that Daewoo Motor has agreed in principle to sell its engine plant in China to General Motors.

In line with the agreement, the engine plant in Yantai in the Chinese province of Shandong is likely to be sold during the third quarter. The plant will be the second overseas subsidiary to be sold since GM’s takeover of Daewoo Motor’s South Korean operations and a wholly owned subsidiary in Vietnam, the report noted.

Citing officials, Asia Pulse said Daewoo Motor and GM are negotiating the specific terms of the sale, including payment conditions and handling of the plant’s workforce. Daewoo Motor and the Shandong provincial government set up the 50:50 joint-venture plant in 1999 with an annual capacity of up to 300,000 engines.

The factory provides engines and transmissions to Yantai Bodywork Corp, a car assembly plant established by the Shandong provincial government. GM and Daewoo Motor have been in talks on the US vehicle maker’s takeover of the engine plant since late last year when GM China acquired Yantai Bodywork Corp. Lee Jong-dae, former Daewoo Motor chairman, recently said the negotiations on the acquisition would be wrapped up soon as both sides are aware the deal will be beneficial to both parties.

The sale of the engine plant is expected to help GM Daewoo Auto & Technology tap the Chinese market. From the second half, GM Daewoo plans to export its subcompact Lacetti [Nubira] and small Matiz to China in CKD assembly kit form. Late last year, Daewoo sold the joint venture it set up in Ukraine in 1998 to a Swiss investment company.

Daewoo Motor has 14 wholly owned subsidiaries in 10 countries with a combined annual capacity of 1.01 million units, but efforts to sell them have encountered difficulties, the Asia Pulse report noted.