GM Daewoo and the bankrupt Ssangyong Motor could be merged into a single company for eventual sale, reports the Dong-A Ibo daily newspaper which cites the main creditor bank of both automakers.
However, the head of the GM unit tells the Korea Herald that there is no intention by the US giant, which earlier this week filed for bankruptcy, to sell the business.
The Dong-A Ibo said the Korea Development Bank will first need to acquire the management rights of the two companies to push through the merger. The bank’s leadership said the consolidation could raise the combined value of the two companies and normalize their operations earlier than scheduled.
A bank official said that since GM Daewoo appears “unable to revive through its own efforts, we have established measures to take over the company’s management. If we do so, we will consider measures to merge GM Daewoo with Ssangyong and sell the unified company”.
Analysts have been predicting a merger and subsequent sale since the beginning of the year. They see a good fit between GM Daewoo’s specialisation in small and medium-size cars and Ssangyong’s in large cars and sports utility vehicles.
To realise such a scenario, the bank needs to become the largest shareholder of both companies and exercise management rights. The bank could become the largest shareholder of Ssangyong if the court orders the carmaker to reduce capital and the bank accepts a debt-for-equity swap.
Another option is for the bank to take over GM Daewoo in return for buying a 23-percent stake from the parent company GM.
Michael Grimaldi, president of GM Daewoo told the Korea Herald that the company “would not be sold under any circumstances” and that the company would continue to operate normally within “New GM.”
He added that GM Daewoo would continue to develop new models as planned. The South Korean unit’s inclusion in New GM was announced late Monday night, after the U.S. automaker filed for bankruptcy protection.
In a statement GM Daewoo said that the company and all its assets have been included in the New GM and that the company will “support the launch of the ‘New GM’ and our parent’s accelerated drive to reinvent itself into a stronger and more competitive company.”
GM Daewoo assets include four plants located in Korea and the VIDAMCO plant in Vietnam. Grimaldi added that payments outstanding from other GM subsidiaries will be made as stated in the contracts and that the company has no plans to layoff regular workers or to implement significant structural changes.
Regarding GM’s negotiations with the Korea Development Bank for additional loans, Grimaldi said that KDB’s input is critical to the company and that it will continue negotiations to secure “necessary funding requirements.”
GM has been negotiating with the KDB, which holds 28% of GM Daewoo, to receive additional loans of around 1 trillion won ($800m) since February.
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