GM's Daewoo bid thought to include Bupyong

By Staff and wire reports

SEOUL, South Korea -- U.S. car giant General Motors' bid for Daewoo Motor includes the aging Bupyong plant, according to local media.

But the Detroit-based company wants concessions to take it on.

General Motors submitted a closed bid for Korea's No. 3 car company on Wednesday. It now starts official negotiations with Daewoo's creditors, including state-run Korea Development Bank.

How much of the company GM wants to buy is a major point of contention. Negotiations will also revolve around how much of Daewoo's $17.3 billion debt GM takes on.

Korea Development Bank and the Korean government are keen to strike a deal after spending more than $2 billion propping Daewoo up. The company lurched into receivership last November.

Sweetheart deal

That, analysts say, means GM can strike a sweetheart deal. It is keen to break into Korea's closed car market, Asia's second-largest.

But the Bupyong plant was built in 1972. It was also the scene of violent demonstrations in February after the company laid off a third of its workers.

GM has its eye on Daewoo's modern passenger-car operations in Kunsan and Changwon.

GM offered $1 billion to $2 billion to take over most of Daewoo's operations, including Bupyong, according to The Korea Economic Daily. It did not cite sources.

The bid includes all the plants as well as Daewoo Motor Sales, its sales arm, the paper said. The unit's stock was trading down 7.9 percent in early afternoon trade, at 4,060 won.

The Maeil Business Newspaper also said GM would take on Bupyong "if additional tax and financial support takes place."

Debt-equity swap

General Motors favors a debt-equity swap. It only wants to take on around $2 billion of the debt, with creditors taking one-third to one-half of the company in exchange for writing off debt.

The Hankook Ilbo newspaper reported Thursday that GM has bid $776 million for Daewoo, and would demand further concessions to take on the Bupyong plant.

Daewoo Motor's creditors said Thursday they would need about two weeks to wrap up the first round of talks. Even that would only lead to a memorandum of understanding, though, and a final agreement might not come before the end of the year.

The talks are taking place outside of South Korea and the United States, in an attempt to avoid distractions. The bid has been the subject of intense speculation in Korea. Hong Kong, Singapore or Tokyo are the likeliest venues.

GM has been mulling its offer since starting due diligence last October. Ford, the creditors' original choice, pulled out last September.

Reuters contributed to this report.

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