GM Daewoo enters uncertain straits

General Motors Corp. is said to be planning to file for bankruptcy protection on Monday, but the future of its Korean subsidiary GM Daewoo Auto and Technology Co. remains as uncertain as ever.

Although GM`s Asia Pacific president Nick Reilly again held talks with the KDB on Thursday to secure funds from the state-run bank, the outcome of the negations has not become any clearer. "Liquidity support cannot be provided to GM Daewoo unless GM provides guarantees that it will develop GM Daewoo into a core production base for small, hybrid and electric vehicles," a high level KDB official was quoted as saying by Yonhap News.



"We see the probability of GM Daewoo`s inclusion in the list of `good companies` as being above 60 percent. For GM Daewoo to survive, promises that ensure growth and stability for the company are essential."

However, experts say that although KDB wants GM to produce hybrid and electric cars at its Korean unit to secure independent competitiveness for GM Daewoo, such developments are unlikely to have the desired effect. "Producing hybrids and electric cars at GM Daewoo will not benefit the independent competitiveness of the company as GM is unlikely to transfer related technologies," said an auto industry analyst who requested anonymity.

"And I think it`s very unlikely that GM will task GM Daewoo to produce the electric car Volt."

In addition to requesting GM produce high-tech vehicles at GM Daewoo, the KDB is said to be looking to increase its stakes in the Korean carmaker. The state-run bank is also said to have called for GM to increase the number of Koreans on GM Daewoo`s board of directors.

However, GM appears unlikely to comply with such conditions.

Reilly, who said GM has no intention of reducing its stake in its Korean branch at a press conference on May 1, reconfirmed the company`s intentions to maintain GM Daewoo`s shareholding structure as is following his meeting with KDB on Thursday.

However, despite the uncertainties that remain, industry officials say that the outlook for GM Daewoo may not be as bleak as it appears.

"The KDB has not yet decided on the GM Daewoo issue because the future of GM itself is undecided. But the bank is likely to decide in favor of GM Daewoo as there are too many factors and associated companies to let the company go bankrupt," said the analyst.

"GM Daewoo is likely to be categorized as a good asset as the company is important to GM because it produces small cars.

Such hopes were echoed by a GM Daewoo official who said that as the company produces a significant proportion of Chevrolet vehicles it is probable that GM will include its Korean subsidiary among the good assets that will be maintained.

"About 80 percent of our 2008 export of about 1.9 million cars and knockdown units were sold as Chevrolets, which is roughly 40 percent of Chevrolet`s sales of about 4 million units that year," a GM Daewoo official said.

"Through the restructuring process smaller cars will be given more focus and GM Daewoo is expected to play an important role in the new GM."

By Choi He-suk



(cheesuk@heraldm.com)