GM Reveals Big Interest in Daewoo Motors

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GM Reveals Big Interest in Daewoo Motors

US auto giant General Motors Corp. said October 13 it had 'a firm interest' in forging an alliance with South Korea's embattled Daewoo Motor Co.
'Options are open on all possibilities, such as joint ventures, strategic alliances and stake participation,' a GM representative said.
A 20-member GM delegation, headed by vice-president Louis Hughes, plans to meet Daewoo officials.
GM officials have surveyed Daewoo's assets and debts since the two companies signed an in-principle agreement on August 6 on a strategic alliance.
'We have not started negotiations with Daewoo yet. Any talks on pricing and terms will follow the result of Korea Development Bank's due diligence on Daewoo,' he said.
Creditor banks, led by the state-financed Korea Development Bank, have been engaged in the painstaking task of uncovering and evaluating the murky debt situation of Daewoo Motors, a process due to be wrapped up by November 6.
It will be only after the final outcome of the survey becomes available that financial authorities and creditor banks will decide how to rescue Daewoo Motor and other Daewoo units, the spokesman of the ministry said.
But newspapers speculated that Daewoo Motors could be nationalized for debt-equity swaps, debt reductions and a capital write-down before being sold off.
The sinking Daewoo Group, burdened with an estimated $60 billion of debt, has proposed a strategic alliance with GM since it was placed under an emergency debt rehabilitation program in August to avert bankruptcy.
But there has been little progress as GM wanted to buy only Daewoo's best assets at home and in Poland.
Analysts said Daewoo Motor's sale could be delayed because of its worsening balance sheets.
'Daewoo's problems are not the kind ... to be resolved within a short period. It will take a long time to conduct due diligence and for acquirers to arrive at a price,' a brokeragfe anlyst said.
'Daewoo Motor has been lagging behind at home and abroad, except for the mini car model, Matiz,' he said, citing the company's heavy discounting and promotions involving extended-term installment purchases.
He warned there may be 'big problems' with capital structure, with Daewoo Motor appearing to underemploy its capital relative to sales.
After a series of consolidations, its capital has soared to 4 trillion won ($3.32 billion) from 500 billion won, with sales expected at 10 trillion won this year, he said.
'The more the government hurries to sell Daewoo Motor, the more troubles will appear, such as hidden losses, to stall the sale talks with GM,' he said.
'For its part, GM knows it has the upper hand in negotiations and is ready to drag its feet and call for a lower price or some other compensation.'
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