GM set to bid on Daewoo Motors

Laid-off Daewoo workers continue to demonstrate, as at this April 26 rally at the Bupyong plant

In this story: GM keen to break into a tight market Bupyong plant faces uncertain future Joint venture would appeal to public RELATED STORIES

By Staff and wire reports

SEOUL, South Korea -- General Motors looks set to unveil its long-awaited bid for part of Daewoo Motors.

Shares in bankrupt Daewoo Motors' sales subsidiary have risen rapidly in the past few days, on speculation that GM is about to announce its bid.

"The sale to Daewoo to GM is now in the final stage," Jin Nyum, South Korea's deputy prime minister and minister of finance and economy, told reporters.

Local media reports also suggest the deal is imminent.

Separately, Jin noted the governor of the state-run Korea Development Bank, Jung Keun-young, is taking a lead role in talks with GM.

"A result will emerge soon," Jin said.

But a Daewoo Motors executive told CNN that GM was still "carefully reviewing" its bid and may not present it before June.

GM keen to break into a tight market

Analysts say GM is keen to get a hold in the Korean market, and Daewoo is its only option. DaimlerChrysler already owns a 10.5 percent stake in No. 1 Hyundai Motors, which also controls No. 2 Kia.

But it is not yet clear how much of the company's domestic operations the American car giant wants to buy.

Jin declined to make any "hasty forecasts" about the deal because it is still in the works.

The Chosun Ilbo newspaper reported Monday that GM wants to set up a joint venture with Daewoo Motors' creditors with $2 billion to $3 billion in paid-in capital.

GM would take a 51 percent stake in the joint venture, according to the newspaper. The creditors would take on the rest in a debt-equity swap.

But Daewoo officials deny GM will only take over Daewoo's domestic sales operations and its Kunsan plant.

Bupyong plant faces uncertain future

That would leave the creditors with Daewoo's aging Bupyong plant, the scene of violent demonstrations after the company announced 1,751 layoffs in February. Daewoo also has a dozen overseas plants and numerous sales offices in other countries.

Sung-sang Lee, Daewoo's director of strategic planning, said GM was still negotiating over which parts of the domestic operations to take.

GM is also interested in its sales subsidiaries in India and Egypt, he said.

The Korean government is reviewing what kind of tax breaks it can offer GM to sweeten the deal, according to the Korea Herald.

The company's creditors, led by the Korea Development Bank, face a deadline in early June. That's when a bankruptcy court will rule on the company's viability.

As a result, the Korean government has asked GM to speed up its proposal.

Joint venture would appeal to public

A joint venture with Korean creditors makes sense to Sung-moon Sun, auto analyst for ING Barings.

"From General Motors' perspective, it should be more safe to have a partnership with domestic creditor groups," he said.

GM would have local support. Keeping a heavy Korean influence would help it sell Daewoo cars to the Korean public, the analyst said.

Daewoo's future is tinged with nationalistic pride. Former Daewoo workers continue sporadic demonstrations, arguing that the company should remain Korean.

Sun expects GM only to buy selective plants. The Bupyong plant is old - built in 1972 - compared with the five-year old Kunsan plant. Many of Daewoo's overseas plants are in bad condition, Sun said.

But he expects a deal soon.

"GM really wants to buy Daewoo Motors, and it is not a good idea to take more time," he said. "If they take more time, it will cost them more money to normalize Daewoo Motors' condition."

Daewoo Group founder Kim Woo-choong, who oversaw the rapid development of Daewoo Motors in the 1990s, stepped down from the group after the Asian financial crisis and is now a fugitive from Korean authorities.

Reuters contributed to this report.

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