World

GM To Make Bid For Daewoo

November 7, 2000 / 11:37 PM EST / AP

U.S. auto giant General Motors Corp. will submit a proposal on Wednesday to take over South Korea's ailing Daewoo Motor, Daewoo's main creditor said.

Negotiators from GM and creditors will start talks in an unidentified “third country” this weekend or next week, said Rhee Sung-kun, a director at the state-run Korea Development Bank.

“Daewoo Motor, its creditors and General Motors will begin formal negotiations on the sale of the assets of Daewoo's passenger vehicle manufacturing sector and its related business,” Rhee said.

He said GM will offer its proposal on Wednesday and will later decide whether to join with carmaker Fiat SpA. of Italy to acquire Daewoo Motor.

Tuesday's announcement was a boost to the South Korean government's efforts to invigorate its economic reform program, which many foreign investors say is not moving fast enough.

Selling Daewoo Motor is seen as a test of the government's will to carry out corporate reforms needed to attract foreign investment.

“If the sale of Daewoo is completed, it will be a big relief for the government and the economy,” said Lee Keun-mo, a senior analyst at Good Morning Securities, a South Korean firm.

Lee expected tough negotiations, citing labor opposition to the takeover.

Daewoo's labor union has staged violent protests in recent months, fearing a takeover will lead to mass layoffs.

“Nothing's new. What had been going on under the table is now on the table,” said Choi Jong-hak, a union spokesman. “Thus, we will keep our struggle against GM's takeover of Daewoo.”

GM entered negotiations to take over Daewoo Motor after Ford Motor Co. of the United States abruptly withdrew a bid in September. GM has spent the past few months taking a close look at Daewoo's finances and labor situation.

During the 1997-98 Asian economic crisis, Daewoo collapsed under an estimated debt of dlrs 15 billion. In November, it was put under court receivership, a process that froze all of its liabilities.

To sweeten a deal with GM, Daewoo Motor's court-appointed management laid off one-third of the company's 16,000 workers early this year.

Daewoo, South Korea's third-largest car manufacturer, can produce 2 million vehicles at plants at home and abroad. Despite its heavy debts, the car maker can help foreign investors penetrate South Korea's closed auto market and serve as a stepping stone into China.