U.S. car giant General Motors has reached agreement with Daewoo Motor to takeover the bankrupt South Korean car company.

After long negotiations, General Motors and Daewoo Motor have ironed out the major issues in a deal that would allow the U.S. auto maker to gain control of South Korea's second-largest car maker.

A memorandum of understanding was signed Friday in Seoul. It states General Motors and its alliance partners intend to invest $400 million in exchange for 67 percent of the joint venture. Daewoo's creditors will inject $197 million in cash for the remaining ownership shares.

The deal is expected to be formalized by the end of the year.

Daewoo Motor was forced to file for bankruptcy after failing to emerge from billions of dollars of debt. It was one of many companies that rashly expanded on borrowed money prior to being devastated by the Asian financial crisis in 1997. The South Korean government has been under pressure to see this deal through to show its commitment to economic restructuring in the corporate and banking sectors.