Daewoo Motor posts large loss

Daewoo may struggle again this year after strikes disrupted production

In this story: GM bid may come in May Six trillion won writedown Debts far greater than assets RELATED STORIES

By CNN's Alex Frew McMillan

SEOUL, South Korea -- Bankrupt Daewoo Motor said Thursday it lost $10.4 billion, or 13.7 trillion won, in 2000.

That is more than 50 percent higher than the company forecast.

But an executive said the scale of the loss would not disrupt talks to sell Daewoo to General Motors.

The loss is up from a $3.5 billion (4.6 trillion won) loss in 1999 and higher than the company's $6.1 billion (8.1 trillion won) estimate.

"This year, we accounted a special loss resulting from the revaluation of our overseas properties," explained Sung-sang Lee, Daewoo's director of strategic planning.

Daewoo said its operating loss improved to $438.6 million, or 580.7 billion won, from a 721.1 billion won loss the prior year.

GM bid may come in May

Lee said talks to sell to General Motors were proceeding. GM may make an offer later this month or in May.

"The big loss of this year will not affect GM's takeover of Daewoo Motor, because the big loss … resulted from special items," Lee said.

He added that Daewoo's efforts to cut jobs and sell overseas assets mean it will post an operating profit this year.

The weak Korean won will also help exports, which account for 65 percent of sales.

Daewoo budgeted for the won to trade at 1,200 to the dollar. But it is now around 1,300. That makes Korean cars cheaper and the company's dollar revenues greater.

Six trillion won writedown

One analyst said an operating profit was still highly unlikely, given that long-running labor disputes have disrupted production in 2001. The analyst anticipates operating losses of 500 billion won both this year and next.

Daewoo saw large scale rioting in February after it dismissed 1,751 workers at its Bupyong factory.

For 2000, Daewoo's outside accountants forced it to take a writedown on its 50 overseas subsidiaries. That amounted to around 6 trillion won.

Daewoo has four plants in South Korea and 12 factories in 11 other countries. The rest of its subsidiaries are sales units, many of which it is trying to sell.

The company also took a writedown of about 4 trillion won against account receivables from its overseas subsidiaries. Its shaky financial situation has made it hard to collect on overseas orders.

A Daewoo spokesman had originally denied a report of the loss for 2000 in the Korea Economic Daily.

Debts far greater than assets

The Korea Economic Daily said Daewoo's assets had also fallen substantially, to the point where its debts are 13.2 trillion won greater than what it owns. Its assets now stand at 9.2 trillion won, down from 18.2 trillion won, the report said.

Daewoo's problems may force a lower sale to GM, already thought to be looking at a firesale price. The deal has been pending for months.

But analysts say GM should be aware of the losses because it has already conducted its due diligence. In any case, GM has limited options to enter the Korean market, they say.

Daewoo, which entered bankruptcy in November, saw a $6.9 billion deal to sell out to Ford fall through last September.

But analysts say the GM sale will fare better. Korea's car market is the second-largest in Asia. But it is closed, with only around 1 percent of its 1.5 million cars coming from imports.

DaimlerChrysler already holds a 10.5 percent stake in No. 1 Korean manufacturer Hyundai Motors. And Hyundai controls No. 2 car maker Kia.

ING Barings auto analyst Sung-moon Suh noted that Hyundai has gained market share from Daewoo. But most of Daewoo's plants are in good shape, he said, and it has the manufacturing expertise GM needs.

"GM has only one choice and that is Daewoo Motor," Suh said.

Reuters contributed to this report.

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