Creditors opened new negotiations with GM and Fiat last month after Ford abruptly bolted from exclusive talks in September.

Daewoo Motor, the crown jewel in what was once Korea's second largest conglomerate, is the most high-profile victim left from a 1997 financial crisis that rocked Asia and toppled several debt-laden Korean firms. The president of Daewoo Motor's main lender, Korea Development Bank, said the bankruptcy would also have an impact on creditors' efforts to sell the company. ``Daewoo Motor is expected to apply for court receivership and it will take a couple of days because of procedural matters,'' KDB's Uhm Rak-yong said. ``It's hard at this stage to predict what decision the court will make,'' Mr Uhm said, but added GM might await that verdict before making any move.

Creditors led by the KDB had stepped up pressure on the union last week, cutting off fresh funds and sending the automaker toward bankruptcy unless a compromise could be reached over demands, including a call to cut 3,500 jobs.

Analysts said the creditors had likely demanded reforms from Daewoo's union based on conditions suggested by automakers interested in buying the firm or its assets. Daewoo Motor defaulted on $77.29 million in debt on Monday and Tuesday, but KDB gave its union a last-minute reprieve, putting off a response until early Wednesday in hopes labour leaders would bend. ``We will not give up hope until the last minute and do our best to avoid a catastrophe,'' KDB's Mr Uhm said late Tuesday. Daewoo's 13,000-member union on Wednesday refused to go along with the creditors' demands.

Lenders have spent almost $2 billion to keep Daewoo Motor afloat since last year. They hope to sell the firm and related units to avert a collapse that could mean more than 19,000 lost jobs at the automaker and additional job losses at its thousands of subcontractors. The banks rescued the automaker and 11 other core units of Daewoo Group last August and have since tried to reschedule their massive debts in hopes of selling the firms or their assets. A due diligence published in January showed the car company had liabilities of 17.9 trillion won versus assets of 11.83 trillion. Its assets are believed to have fallen in the months of uncertainty since and Daewoo's plants in Korea's are running at just 60 per cent of capacity.

(Reuters)