Daewoo union says GM sale 'no problem'


KDB Governor Jung Keun-yong (l) came to the table with GM's Schlais last year, but the deal still lacked worker participation

By Alex Frew McMillan
CNN Hong Kong

SEOUL, South Korea (CNN) -- Daewoo Motor workers have agreed to allow American carmaker General Motors to take over their company.

Union spokesman Choi Jong-hak told CNN on Wednesday that the Daewoo Motor Labor Union had "no problem" with General Motors' offer.

The sale has struck numerous roadblocks, not least of them Daewoo's workers. But that tension is now resolved, the union says.

GM's Nick Reilly has been in Seoul since the start of the year, completing negotiations.

He is set to take over as President and CEO if in fact the new company, a joint venture, gets off the ground.

Worker demonstrations

Daewoo employees have launched frequent demonstrations against a sale to an overseas company. The workers last year rioted and clashed with police at the Bupyong plant, Daewoo's oldest and largest, to protest job cuts.


The scene turned ugly last year, when Daewoo unionists clashed outside the controversial Bupyong factory

The rank and file workers must still ratify the deal between their leaders and Daewoo's management. Union leaders and the workers they represent have at times been at odds over the benefits of a GM deal.

GM and Daewoo's creditors reached a preliminary deal last September for the U.S. company to pay $400 million into a holding company to take over two-thirds of Daewoo.

But that deal, a Memorandum of Understanding (MOU), ran into trouble when GM scoured the books for debt.

Now General Motors again looks set to pay in $400 million to buy control of Daewoo.

"The spirit of the MOU was maintained, both sides are satisfied," GM spokesman Rob Leggat told CNN. "When you look at the financial terms you will see that that was the case."

When told of the collective bargaining arrangement between Daewoo's union and management, he said GM was glad to hear they see eye to eye.

"Any progress on reaching a collective bargaining agreement is appreciated," he said.

Announcement soon

An announcement on a $1.2 billion, or 1.56 trillion won, sale is due later Wednesday, when Daewoo's main creditor, the Korea Development Bank, holds a press conference.

But GM and Daewoo still have yet to complete final negotiations.The final sale is likely in the middle of April, sources close to the deal tell CNN.

Even after the negotiations wrap, the legal framework has to be settled. That means the establisment of the joint venture could take four months.

The new company is tentatively dubbed "GM-Daewoo Motor."

As previously announced, the KDB and other creditors are set to pay in $197 million. GM would own two-thirds of the joint venture and the creditors, one-third.

The balance of the $1.2 billion tally will come in the form of stock paid to the creditors, who in turn will issue a new $750 million loan package, the Chosun Ilbo newspaper states.

GM used to own Daewoo Motor as a joint venture until 1992, when it sold out, partly due to labor problems. It sold its 50 percent stake for $170 million.

Workers see situation now is not 'sufficient'

A management employee in Daewoo's sales office at its Bupyong plant told CNN he had heard of a final deal with the workers in the Korean media. But he said he was not aware of any of the details.

But he said the union would eventually realize that not reaching a deal would doom the company to failure.

"Our workers have so many difficulties ... they have insufficient money, and [they know] that in two or three years they cannot work a sufficient amount, so that means they cannot earn sufficient money," the management employee said, asking not to be identified.

GM Asia-Pacific CEO Rudy Schlais told CNN back in September that the talks were far from over.

"We've got the bones of the agreement and now we're putting the muscle and the texture and so forth on it," he said at the time.

He conceded there was still a "tremendous amount of work to be done," and said an agreement with the labor union was the "next step."

Schlais steps down on May 1, with new Asia-Pacific President Fritz Henderson taking over his duties.

Shares in Daewoo Motor Sales Corp were up 7.25 percent to 9760 won in Seoul by midday Wednesday, after going as high as 10,250 won.