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GM to Tap One of the World's Fastest Growing Car Markets - 2002-04-30

General Motors agreed Tuesday to take over parts of South Korea's bankrupt Daewoo Motors. The deal means GM gains access to one of the world's fastest-growing car markets.

General Motors Chairman John Smith signed the agreement Tuesday in Seoul along with Daewoo President Lee Jong-Dae and Jung Keun-Young, head of the auto maker's main creditor bank.

Under the deal, the American carmaker will invest $400 million in the company, in exchange for a 67 percent stake. Existing creditors will own the rest of Daewoo, and they will invest $197 million in the joint venture. Creditors also will provide a long-term $2 billion lifeline.

The move follows drawn-out negotiations in which the two sides battled over financial and labor issues. Unionized workers held violent protests against a GM buyout, fearing it would lead to lay-offs.

But they voted in favor of the sale two weeks ago after GM pledged to maintain the current workforce and rehire several hundred workers who had already lost their jobs.

While employees may be satisfied, industrial consultant Andrew Pratt in Seoul said some U.S. car retailers are not.

"The U.S. dealers of Daewoo Motors are unhappy because GM has said that the Daewoo brand will not to be sold in North America and that it will be focused on Asia and Europe. So there is going to be re-branding and re-focusing, which will take some time," Mr. Pratt said.

The pact finalizes the first restructuring deal in Korea following the Asian currency crisis of 1997. That crisis led to the collapse of several large Korean conglomerates.

The Daewoo group's debts exceeded $80 billion, with Daewoo Motor responsible for about quarter of that sum.

South Korea's government is hoping that Tuesday's deal with attract more large foreign investments.