UPDATE: GM Won't Sell GM Daewoo, To Keep It Part Of New GM
02 Juni 2009 - 5:44AM
Dow Jones News
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