Daewoo Motor in last-minute bid to avoid bankruptcy
Daewoo Motor Co. managers and union leaders held crisis talks Tuesday as South Korea's second largest automaker battled to head off bankruptcy.
Creditor banks have demanded the union accepts job cuts for the automaker to avoid being declared bankrupt later Tuesday. The company's latest crisis could affect a proposed takeover by US giant General Motors Corp (GM).
"We have narrowed differences on ways and directions of corporate restructuring," Daewoo Motor chairman Lee Jong-Dae said after four hours of talks with the union leaders in the morning.
A union representative confirmed progress had been made but the two sides had yet to reach an agreement on redundancies and payment of wage arrears.
Park Sang-Bae, a director of the main creditor, Korea Development Bank (KDB), said KDB was not fully satisfied with the "tentative" agreement.
"It is not fully satisfactory, but it is not so worthless to reject outright," he said, adding the bank would discuss with other creditors whether to let the automaker go bankrupt.
Unions have demanded creditors and management pay around 110 billion won ($100 million) of wage arrears before there can be job and pay cuts.
Daewoo Motor, which has been kept alive since last year by emergency loans, must repay a total of 88 billion won of debt on Tuesday including 44.1 billion won it failed to pay Monday.
But company officials said that with liquidity already exhausted, Daewoo Motor would go bankrupt unless unions accept drastic cost-cutting measures.
The management has proposed a program to save 900 billion won through 3,500 lay-offs at home and reduced production at plants in Europe and India.
Daewoo Motor's management is trying to boost the prospects for a 450 billion won bail-out and speeding up a tentative sale to GM.
But the company's 17,000 production workers in South Korea have warned of protests against the program.
Ford Motor Co. pulled out of a $6.9 billion takeover deal in September, forcing creditors to turn to GM as the last-chance suitor. But union protests have made GM more nervous, although it said it was continuing with its due diligence study of Daewoo Motor's precarious finances.
Daewoo Motor has huge debts and sales are falling each month as it battles for survival.
If the debt is not paid Tuesday, creditor banks or Daewoo Motor would file for court receivership, an action to be accompanied by a freeze on all liabilities and claims on loans.
In this case, a chain of bankrupcies involving Daewoo Motor's suppliers would likely occur. Daewoo Motor has 504 suppliers with 300,000 employees.
Should the court decide on a court receivership, the court would appoint an administrator to try to turn the company around.
If the court turns down the court receivership request, assets of Daewoo Motor would be auctioned off and the proceeds divided among creditors.
Daewoo Motor's main creditor, the Korea Development Bank, said talks with General Motors to sell Daewoo Motor would continue even if the company is placed in receivership.―(AFP)
© Agence France Presse 2000
© 2000 Mena Report (www.menareport.com)
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