The Hindu : GM signs pact to buy Daewoo Motor

Online edition of India's National Newspaper
Wednesday, May 01, 2002

Business

Business

GM signs pact to buy Daewoo Motor

SEOUL, South Korea, APRIL 30. General Motors Corp. signed a $1.2 billion deal on Tuesday to acquire key components of South Korea's Daewoo Motor Co., gaining a long sought-after production foothold in a fast-growing automobile market.

The deal, which followed seven months of tough negotiation, has symbolic significance for the South Korean Government, which has vowed to attract foreign investment to restructure the corporate sector following the 1997-98 Asian financial crisis.

On the same day, however, the Idaho-based Micron Technology Inc. failed to take over another debt-ridden South Korean company, computer chipmaker Hynix Semiconductor Inc., when Hynix's board of directors voted down a $3.8 billion takeover proposal. With global chip prices rising, Hynix's board said the company could survive on its own.

The GM-Daewoo deal was signed by GM Chairman, John F. Smith, Daewoo President Chairman, Lee Jong-dae, and Jung Keun-young, head of the State-run Korea Development Bank — Daewoo's main creditor bank.

Daewoo auto workers had held violent protests against a GM takeover, which they feared would lead to mass layoffs. They backed down from their opposition after GM promised to maintain employment at current levels and offered to rehire 300 workers who had been laid off.

Under the deal, GM and its partner companies will invest $400 million to hold a combined 67 per cent of a newly established company to which Daewoo would sell three key manufacturing plants — two in South Korea and one in Vietnam — and nine sales subsidiaries in Puerto Rico and European countries, including Austria, France, Germany, Italy, Spain, Switzerland and the Netherlands.

Daewoo's creditor banks will invest $197 million and hold the remaining 33 per cent of the new company. In payment for Daewoo's assets, the new company will issue $1.2 billion worth of long-term redeemable preferred stocks to the creditors, most of them government-controlled. The creditors will also extend $2 billion in long-term loans to the new company, which will assume $573 million of Daewoo's liabilities. — AP

PTI adds:

Leaves out India operations

NEW DELHI, APRIL 30. The Indian operations of South Korea's Daewoo Motor Company have been left out in a takeover deal signed today with the U.S. auto giant General Motors Corp. GM has forged an agreement with Daewoo Motor and its creditors to acquire key assets of the bankrupt automaker.

The non-inclusion of Daewoo Motors India in today's deal might affect its operations in future. The non-inclusion is also likely to affect its ongoing huge debt restructuring programme with domestic banks and financial institutions.

Daewoo India is 91.6 per cent owned by Daewoo Corp., the parent of Daewoo Motor Korea. The remaining stake is held by domestic financial institutions and the public.

Send this article to Friends by E-Mail

Business