Korea’s
finance minister Jin Nyum said that General Motors should settle its plans for
Daewoo Motor Co. by the end of February, as the Korean automaker battles labour
disputes, supply shortages and other woes, Bloomberg News reported.
"If they (Daewoo Motor officials) demonstrate their restructuring efforts,
then the possibility of a deal with GM" will increase, Jin told the news
organisation. "All those things, I think, should be finalised no later
than next month."
Go deeper with GlobalData
Talks to sell Daewoo Motor to GM and its Italian affiliate, Fiat SpA, are in
their fifth month with little progress as troubles at Korea’s second largest
automaker mount.
Daewoo’s labour union is voting this week whether to go on strike to oppose
planned job cuts while its main Korean plant faces disrupted production as key
suppliers declare insolvency, Bloomberg said.
"I understand [GM] is going to have a board meeting sometime in February,"
Jin told Bloomberg. "So in that context, Daewoo Motor’s management is doing
[its] job to meet those kinds of requirements."
GM’s interest in Daewoo Motor comes as the world’s-biggest automaker plans
to cut first-quarter production in North America by a fifth as demand there
sags.
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Jin told Bloomberg’s reporter that the government hopes Daewoo Motor will make
sufficient changes and show progress in overcoming its problems to attract an
offer from GM.
"I think whether they succeed in restructuring their company and changing
labour relations" will be key to whether GM would make an offer and "how
much GM will pay," Jin said.
Last September, Ford Motor Co, dropped its $US7 billion bid to buy Daewoo Motor
after failing to agree with creditors. Jin told Bloomberg that it was "quite
embarrassing to learn of Ford’s pull-out."
He doesn’t discount the possibility that the same risk applies to GM, which
said it has so far conducted only a preliminary due diligence of Daewoo’s finances
and is yet to complete a final study.
Daewoo Motor should make changes to survive on its own, a move that would make
the company attractive enough to "sell to GM" or at least it could
"run for some time until it finds other possible partners," Jin said.
That, Bloomberg said, could be tough as the failure of Heung Il Industry Co.
and as many as 18 other suppliers continues to hinder production at Daewoo’s
Bupyong and other Korean plants.
Daewoo Motor’s lenders agreed last November to cover only 40 percent of the
total 1.42 trillion won ($US1.11 billion) that the insolvent automaker owes
suppliers. At the end of September, Daewoo Motor’s debts totalled 18.9 trillion
won, topping the 18 trillion won value of its assets.
The Korean government is demanding that Daewoo Motor learn to survive on its
operating profit, which should "put it on the right track," Jin said.
"They should conduct a strong forceful restructuring so that they could
meet an operating balance this year," he said. "Without more money
from creditors, they should keep their company running."
"GM, I think, (has) great concern especially over Daewoo labour relations
and Daewoo restructuring efforts," Jin told Bloomberg. "They don’t
like to take a risk in fighting with the most militant trade union in the world."
