3rd UPDATE:GM Daewoo Seeks Funds From Korea Development Bank
20 February 2009 - 9:14PM
Dow Jones News
The South Korean unit of General Motors Corp. (GM) has asked for
emergency funding from state-run Korea Development Bank as it faces
a liquidity crunch.
GM Daewoo Auto & Technology Co. has already reached its
credit limit of 1.3 trillion won (US$865 million) from KDB and
commercial banks and has KRW125 billion in loans coming due in
October, a KDB official told Dow Jones Newswires Friday.
The KDB official declined to say how much the Korean automaker
was seeking in aid noting an amount hasn't been discussed yet, but
Yonhap News Agency reported Friday the company has asked for KRW1
trillion.
GM Daewoo owes KDB KRW1.055 trillion.
"We will decide whether to offer financial aid to GM Daewoo
after reviewing documents about the company's financial status,"
the official said.
GM Daewoo's request underscores the severity of the crisis in
the U.S. auto industry and its ripple effect.
GM and GM's affiliated companies own a 72% stake in GM Daewoo,
while KDB has the remaining 28%.
The comments came as Saab Automobile AB, GM's loss-making
Swedish unit, said Friday it is applying for reorganization with a
Swedish court. Earlier in the week, GM approached five foreign
governments for a total of $6 billion in financial support. The
U.S. automaker said it is in talks with authorities in Germany, the
U.K., Sweden, Canada, and Thailand.
However, Thai Prime Minister Abhisit Vejjajiva has already said
that his government has no plans to assist struggling foreign
automakers in Thailand.
Last week, GM Daewoo's president and chief executive Michael
Grimaldi met South Korea's Knowledge Economy Minister Lee Youn-ho
to ask for financial aid but the government turned down the
request.
The outcome of the latest request to KDB is uncertain.
The state-run bank has bailed out other distressed South Korean
companies, including Hynix Semiconductor Inc., in the past.
GM Daewoo confirmed the request made to KDB and said it will
submit formal documents for financial help.
"We are in discussions with the Korean government and KDB to
secure credit lines during the current global credit market
liquidity shortage in order to fund new product development plans
and new plant investment projects," spokesman Park Hae-ho said.
GM Daewoo was set up in 2002 when GM and its partners bought a
majority stake in the automobile unit of bankrupt South Korean
conglomerate Daewoo Group, which collapsed in 1998 under mountains
of debt.
GM Daewoo was one of the few profitable overseas units under GM,
but the U.S. company's own financial problems have added to the
South Korean unit's problems.
In January, GM Daewoo's total sales fell 51% from a year earlier
to 45,842 units, compared with the industry's 35% drop.
GM Daewoo has adjusted production at its three South Korean
plants in Bupyeong, Gunsan and Changwon to keep inventory low amid
lower demand.
-By Kyong-Ae Choi and Jin-Young Yook, Dow Jones Newswires;
822-2198-2236; kyong-ae.choi@dowjones.com