But analysts said it was unlikely that GM would buy all of the assets of the unlisted Korean automaker while the government pressured by a year-end deadline to conclude the country's biggest corporate clean-up might be forced to sell off Daewoo Motors' assets piecemeal.

"This is a very firm deadline for the government," said Mr Bryan Song, an analyst at Merrill Lynch in Seoul. "In every aspect, the Korean government is cornered." Uncertainty over the fate of Daewoo Motor has undermined confidence in Korea's restructuring efforts. Daewoo Motor is one of the 12 companies in the ailing Daewoo Group rescued last August by creditors who are trying to restructure debts by selling off assets and units. Daewoo companies' shares jumped on news of the talks with GM and Fiat on Monday, though analysts said the buying had little broad impact on the benchmark Korean stock index which sagged 3.23%, led by tech share falls.

GM lost out to Ford Motor in June for the right to enter exclusive talks with Daewoo but has shown renewed interest since Ford abruptly pulled out of negotiations last month, two weeks before it was expected to make a binding offer.

GM is seen as the best informed party regarding Daewoo Motor, as the two had a 15-year alliance which ended in 1992. Since Ford stepped aside in mid-September, local media have speculated that the creditors of Daewoo Motor and related firms such as sports utility specialist Ssangyong Motor.