GM Daewoo incurred a foreign exchange loss of nearly 3.1 trillion won (US$2.6bn) by mishandling currency risks last year, about 800 billion won more than previously revealed.
The exchange loss was equivalent to 25% of the automaker’s gross sales last year, according to Korea Development Bank (KDB) data submitted to lawmaker Kim Young-sun, chairwoman of the governing Grand National Party National Policy Committee, the Korea Herald reported.
The report indicated that the automaker was planning to roll back investments on facilities and R&D by 1.04 trillion won and inventory storage costs by KRW430bn won as part of measures to cover the heavy loss but such a plan is drawing criticism that GM Daewoo is sacrificing its own sustainability by downsizing R&D.
“GM Daewoo’s management is putting the company’s future at stake instead of trying to rationally resolve the mess they made,” said Kim, who also blamed KDB, GM Daewoo’s main creditor, for failing to watch over the carmaker’s management.
Observers say that GM Daewoo’s bigger-than-expected forex loss may trouble its ongoing negotiations with KDB to receive fresh emergency loans.
Since last February, the country’s third-largest car maker has been seeking emergency funding of 1 trillion won from the state-run lender, which holds a 27.97% stake in GM Daewoo, to cover costs of new vehicle development and export finance.
But the talks have not seen significant progress as KDB refused to provide the loans unless parent GM supports the long-term profitability for its Korean unit.
GM Daewoo officials fended off negative speculation, stressing that KDB is continuously reviewing the loans even though it is aware of the forex losses.
“The company is making comprehensive efforts to cut costs, so scaling back R&D is not the biggest and only measure we’re taking,” GM Daewoo spokesman Park Hae-ho told the paper.