General Motors CEO Fritz Henderson on Thursday reiterated that the automaker would join a rights offering by its struggling South Korean GM-Daewoo unit, but gave no hint whether GM would put in as much as the unit’s biggest creditor wants.
Go deeper with GlobalData
Discover B2B Marketing That Performs
Combine business intelligence and editorial excellence to reach engaged professionals across 36 leading media platforms.
Henderson, speaking to Reuters at a GM Daewoo plant on the outskirts of Seoul, said he had “very positive” talks with the government-run Korea Development Bank (KDB), GM Daewoo’s leading creditor.
“GM has resources around the world. Resources can be used not only from the US, including operations here in Korea. We are able to provide support, if necessary,” Henderson said when asked if GM would support a rights offer.
KDB has said it may call back maturing loans and foreign exchange forward contracts if GM does not pump more money into the 51%-owned unit, which accounts for about a quarter of GM’s global auto production and builds most of the Chevrolet-branded cars GM sells outside North America.
Last month, GM Daewoo Automotive and Technology said it would raise KRW491.2bn (US$424.1m) by selling new shares to existing shareholders, Reuters noted. [ID:nSEL000762]
KDB has said it wants that sum to be more than doubled.
GM is barred from using any of its own $50bn lifeline from the US government to support overseas operations and would have to dip into money from its non-US operations, Reuters noted.
Henderson’s visit to South Korea followed eight months of talks between GM and KDB to secure about KRW1 trillion in new loans for the cash-strapped carmaker, the third largest in South Korea.
At stake is a key hub for small car design and engineering that is crucial to GM’s plans to sell more vehicles in emerging markets and meet tougher US fuel economy standards.
“GM needs GM Daewoo as it is responsible for small cars, which are attracting more customers around the globe,”Hyundai Securities autos analyst Cho Soo-hong told the news agency.
“Given GM Daewoo’s contribution to the economy, KDB is expected to eventually provide financial support to GM Daewoo,” Cho added.
Henderson later met President Lee Myung-bak, Reuters added, but there was no word on whether they touched on the issue of extra financing.
Analysts have said the government, fearful of losing jobs, is keen to save GM Daewoo, which employs 17,000 and has 400 direct vendors.
They added that, in the current political and economic climate, KDB has little choice but to hand a lifeline to the unit, though it will push hard to extract concessions from GM.
GM Daewoo lost KRW876bn in 2008 while ts January-September 2009 sales were down 43% year on year to 401,808 vehicles.
