Job security proves hurdle to GM takeover of Daewoo

Seoul, Jan 4: Workers demanding job security is one of the last remaining hurdles to a proposal by the US auto giant General Motors Corporation (GM) to take over South Korea’s troubled Daewoo Motor Company, officials said today.

Lee Keun-young, head of the government’s Financial Supervisory Service, said almost all pending issues except for job security have been resolved in GM’s takeover negotiations with Daewoo creditors.
"Both sides are in agreement on most issues except GM’s demand that Daewoo’s labour contract be revised, so I can foresee an early conclusion of the negotiations," Lee said.

But Lee could not say how soon the GM-Daewoo deal could be wrapped up. On several occasions in recent months, Lee had expressed similar optimistic views.

After months of talks, GM signed a non-binding preliminary agreement in September to acquire control of Daewoo. The auto giant had said it planned to sign a binding agreement before the end of last year.
The chief South Korean financial regulator said one unresolved issue is GM’s demand to nullify an agreement Daewoo Motor has with its labour union that requires the company to guarantee the jobs of all 10,000 workers even after the company is sold.

According to South Korean officials, GM is particularly uneasy about a provision that requires Daewoo’s management to seek consent from the labour union when it relocates the workers.

Another unresolved issue is how to share with creditors Daewoo’s "contingent liabilities" that may surface after takeover, they said.
Daewoo’s labour Union refused to back down.

"We want it clearly written down in the final deal that there will be no layoffs," said Choi Jong-hak, a Daewoo Union spokesman. "No worker will sit back and just accept a layoff."

Daewoo Motor, a flagship of the giant Daewoo group which collapsed in the aftermath of the 1997-1998 Asian financial crisis, went bankrupt in November 2000 and has since been under the court receivership.

Its total debt is estimated at more than $17 billion.

Daewoo Motor has been a major headache for the South Korean government, which has been struggling to reform the country’s debt-ridden businesses and financial industry.

— Reuters