General Motors Corp. (GM) is not planning to sell its South Korean unit GM Daewoo Auto & Technology Co., GM Daewoo Chief Executive Michael Grimaldi said Tuesday.

"GM Daewoo and GM Korea will continue to operate in South Korea as they have been," Michael Grimaldi, who also serves as GM Daewoo's president, said in a press briefing.

GM Daewoo said Monday it will become part of New GM as the parent company proceeds with restructuring under Chapter 11 bankruptcy protection in the U.S.

The Korean unit itself is cash strapped due to its heavy dependence on exports, which have fallen sharply, and heavy losses from currency hedging contracts that resulted from the appreciation of the won against the dollar.

Liquidity could be "critical" in the second quarter without external aid, Grimaldi said in April.

Grimaldi didn't answer directly when asked Tuesday if GM Daewoo needs to offer a stake as collateral in return for possible financial aid from state-run Korea Development Bank. He said, "GM Daewoo will play an important role under New GM as the vehicle development center and manufacturing base of small cars."

GM Asia Pacific President Nick Reilly last week said "GM Daewoo has no desire to sell shares." He also said "all options are open" when asked if GM Daewoo may offer a stake as guarantee for support from KDB.

KDB is GM Daewoo's second-largest shareholder with a 28% stake. The rest of the Korean carmaker is owned by GM and GM-affiliated companies.

As for any possible impact on GM Daewoo and GM's Korea-based suppliers' payment terms and contracts following the bankruptcy filing, GM Daewoo said they will remain intact.

"There will be no layoffs for regular GM Daewoo employees," said the chief executive.

As part of its restructuring, GM plans to produce small cars in the U.S. from 2011 in a plant that has an annual capacity of 160,000 units. A site for the plant has not been determined yet.

A GM Daewoo union spokesman said Tuesday "the planned production of small cars in the U.S. may threaten GM Daewoo's status as the global manufacturing hub of small cars."

In February, GM Daewoo asked KDB to extend fresh loans - which were reportedly worth KRW1 trillion - after it used up a $2 billion credit line.

"Constructive" talks with KDB are underway, said Grimaldi who is positive about results of the ongoing discussions.

After posting three straight years of full-year net profit from 2005-2007, GM Daewoo shifted to a net loss of KRW875.69 billion ($663 million) last year from a net profit of KRW540.51 billion a year earlier.

GM filed for Chapter 11 bankruptcy protection in New York Monday after a decades-long series of management miscues and production problems exacerbated by stiff foreign competition and rising oil prices.

The Obama administration Sunday said the government would provide an additional $30 billion in financing to GM in return for 60% equity in the new company and $8.8 billion in debt and preferred stock.

-By Kyong-Ae Choi, Dow Jones Newswires; 822-2198-2236; kyong-ae.choi@dowjones.com