Daewoo car factories start again


Daewoo says it lost about 20,000 cars in production and $166 million due to the work stoppage

By Alex Frew McMillan
CNN Hong Kong

SEOUL, South Korea (CNN) -- Daewoo Motor Co. said Wednesday it reopened its Korean car factories after a two-week halt.

The company told CNN the company's three factories are back in action, after a key supplier agreed to ship parts again.

Parts supplier Korea Delphia Automotive System Corp. stopped supplying parts to Daewoo on August 28. It and other suppliers claimed Daewoo owed $700 million in unpaid bills dating to June.

A Daewoo spokesman said the delay has cost the company about 200 billion won ($166 million) and has resulted in a production loss of about 20,000 cars.

The dispute was equally damaging for the suppliers. Korea Delphia could not afford to hold out for much longer, according to industry observers.

The supplier lost 69.2 billion won ($57.5 million) in 2001 and gets around 70 percent of its sales from Daewoo.

Suppliers still unhappy

Korea Delphi said it was resuming supply for the sake of small- and medium-size suppliers, which risked bankruptcy if the shutdown continued. Many of Daewoo's suppliers agreed last Wednesday to ship to the company.

Daewoo Motor says it has begun repaying some of its bills. But the suppliers maintain they are still unhappy with the resolution of the dispute.

The production halt has cast a long shadow over the creation of a joint venture with General Motors Corp.

Daewoo Motor agreed in April to pay creditors $400 million to set up GM Daewoo Automotive & Technology Co., which will take over most of the company's operations.

It is due to launch later this month or early in October. GM has said the dispute with the parts suppliers will not disrupt those plans.

GM used to own part of Daewoo as a joint venture. It sold out largely because of labor disputes at Korea's third-largest car company.

The suppliers are keen to see their claim settled before the joint venture is set up, which would be a different legal entity.

Daewoo, which went bankrupt in November, is unlisted. But stock in Daewoo Motor Sales, its sales affiliate, is up 5.0 percent on Wednesday morning at 8,610 won.

That's giving a boost to Seoul's Kospi index, up 1.32 percent shortly before noon.