Korea’s Daewoo says debt is no obstacle to GM sale

Seoul, Jan 7: South Korea’s Daewoo Motor has said on Monday that renewed concerns about its debt would not derail talks to sell key assets of the ailing car maker to General Motors Corp, which hopes to complete a deal within six weeks.

Responding to a local newspaper report that General Motors had found two trillion won ($1.54 billion) of liabilities in Daewoo’s overseas subsidies, Daewoo said the report was “exaggerated”.

“Issues regarding potential debt at overseas units have all been settled with General Motors,” said Daewoo spokesman Kim Sang-hoon. “The size of the reported debt looks absurdly high.”

Head of GM’s Asia-Pacific operations Rudy Schlais said in Detroit on Sunday its planned purchase of two domestic and two overseas plants could be completed in six weeks. “We would like to get it finished as soon as possible — may be four to six weeks,” Schlais said. The Korea Economic Daily said on Monday that the US auto giant wanted to reduce the scope of its asset purchase plan and pay less for the Korean carmaker after its due diligence found additional liabilities at 24 overseas manufacturing and sales subsidies.

The Korea Development Bank (KDB), the main creditor of Daewoo Motor, also denied the newspaper report.

“Recently, we have not heard of GM changing its position because of the liability issues,” said Yang M.S, A KDB spokesman. “The two parties are now putting the final touches on a deal only several weeks away.” The governor of the bank later told reporters he understood accountants for the two parties were fine-tuning differences on the potential debt at Daewoo’s overseas plants and sales outlets.

“It is natural to discuss the possibility some unexpected liabilities are popping up,” said governor Jung Keun-yong. “But it is inappropriate to make public the scale of the potential liabilities.”

Analysts also said the debt issue would not impede talks between Daewoo’s creditors and GM as Daewoo’s financial status had been transparently scrutinised.

— Reuters