General Motors CEO Fritz Henderson on Wednesday was in talks with state-run Korea Development Bank to try to secure hundreds of millions of dollars in fresh loans for the troubled GM-Daewoo subsidiary, officials said.
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KDB is the key creditor of GM Daewoo Auto and Technology, a GM Daewoo spokesman told news agency AFP.
The meeting came a week after the bank threatened not to roll over loans or provide fresh funds to GM Daewoo unless the US parent agreed to its demands.
The spokesman said the meeting between Henderson and KDB officials had been expected to focus on GM-Daewoo’s request for loans but declined to give details.
GM Daewoo has been hit by falling demand due to the global downturn, while its US parent emerged from bankruptcy in July under a government-backed rescue plan.
GM Daewoo is seeking a one trillion won (US$855m) loan after using up a $2bn credit line from creditors.
AFP noted it is also reportedly planning a KRW491.2bn share sale this month to secure working capital. But the bank wants the carmaker to increase its share offering and accept other conditions in return for aid.
“If GM does not accept our demands, KDB will not participate in a new share sale and plans to retrieve maturing currency forwards or loans,” KDB chief Min Euoo-Sung said last week.
Min urged the US company to offer part of its stake in the local unit as collateral. He also insisted GM Daewoo should be allowed to retain licences for cars that it develops itself.
“We have yet to fix the size of our share offering,” the GM Daewoo spokesman told AFP, adding the issue would be discussed at the talks between Henderson and KDB officials.
He refused to confirm news reports that GM Daewoo’s problems were aggravated after being hit with foreign currency hedging losses amounting to 2.7 trillion won.
GM holds a 51% stake in GM Daewoo while KDB owns 28%.
GM Daewoo posted a net loss of about $700m last year. In the first eight months of this year, its sales fell 45% year on year to 344,444 units.
The South Korean government has said banks, not the government, should lead the process of salvaging ailing car firms, maintaining that direct aid breaches global trade rules.
