GM reportedly in talks over Daewoo

Monday, October 9th 2000, 12:00 am
By: News On 6

DETROIT – General Motors Corp. and Fiat SpA reportedly are in talks to buy at least some of the assets of South Korea's second-largest automaker, the ailing Daewoo Motor Co., with an announcement on the matter expected Monday.

GM, which had a 15-year alliance with Daewoo that ended in 1992, has long been interested in Daewoo as a way to further expand into Asia's auto markets, which are starting to recover from their slump during the 1997-1998 Asian financial crisis.

GM would not comment specifically on reports by the Financial Times and the Wall Street Journal that it had reached agreement with Daewoo's creditors to begin negotiations for a potential purchase. Steve Harris, GM's vice president of communications, said, "We've had preliminary contact with the South Korean government, but beyond that we have nothing to say at this point."

Last month, Ford Motor Co. pulled out of talks to purchase Daewoo.

"The Korean market is very significant," Mr. Harris said Sunday. "We'd very much like to more fully participate in that market, and increase our presence in the entire Asia-Pacific region, but the Korean market in particular."

The chairman of South Korea's Financial Supervisory Commission, Lee Keun-young, said "GM sent a letter of intent to buy Daewoo Motor and its affiliated units as a single package," the Financial Times reported.

Officials close to both companies are playing down the likelihood that GM will bid for all of Daewoo's assets. The Financial Times reported that GM and Fiat are contemplating an offer under which GM would hold up to 50 percent of Daewoo and Fiat would own another 20 percent.

GM emerged as the likely bidder for Daewoo after DaimlerChrysler AG and Hyundai Motor Co. confirmed, once Ford withdrew its offer, that they would no longer bid for an outright purchase of the South Korean automaker. However, Hyundai may consider buying parts of Daewoo's operations, Dow Jones Newswires reported.

In June, the South Korean government gave Ford, which made a $6.9 billion offer, exclusive negotiating rights for Daewoo, after dismissing joint bids made by GM and Fiat and another from DaimlerChrysler and Hyundai Motor, South Korea's largest car maker.

"GM has leverage right now and it's using this to get the most advantage in terms of negotiating with the government and preventing other parties from coming in," Mark Barclay, an auto analyst at Samsung Securities Co. in Seoul, told Bloomberg News.

Daewoo Motor, which collapsed financially in August 1999, has been kept alive since then with cash injections and is burdened with huge debts, run up by its parent company, the now-bankrupt Daewoo chaebol – a conglomerate with a powerful presence in the South Korean economy.

The Seoul government has been desperate to sell off Daewoo, hoping to use the money to bail out other troubled sectors, such as the banking industry.