Bank Says Daewoo Funds Depend on Restructuring

Creditors will think twice before providing fresh capital to bankrupt Daewoo Motor Co. if the carmaker's labor union keeps fighting against layoffs, the president of the Korea Development Bank said Wednesday.

"The union said it would strike starting Friday to oppose the layoffs of 1,785 union members," said Uhm Rak-yong, the head of the bank, Daewoo's major creditor. "But if Daewoo fails to normalize its cash flow through a drastic restructuring, creditors will cut off additional capital to the carmaker, which is losing 150 billion won ($120 million) a month."

Creditors agreed in December to provide 730 billion won in fresh loans by June on the condition that Daewoo improve its cash flow. They put in 80 billion won in December and 75 billion won so far this year.

Mr. Uhm said that if the union remains defiant and hinders Daewoo's restructuring, the court may throw out its initial ruling that put Daewoo in receivership. He also touched on the ongoing question of a takeover. "General Motors is in no hurry to buy Daewoo, and is watching to see if Daewoo's cash flows and corporate value improve," he said. "If Daewoo fails to restructure and continues to lose money, GM will abandon its bid just as Ford Motor did."

by Cheong Chul-gun