By Kim Jae-kyoung
The Korea Development Bank, GM Daewoo Auto & Technology’s main creditor, reaffirmed that it will only provide financial support when General Motors promises to make its Korean unit a main production base of small cars.
``We cannot offer financial assistance to GM Daewoo if its parent U.S. company does not guarantee that it will make GM Daewoo a main manufacturing post of hybrid and small cars,’’ a senior KDB official said.
His remarks came a day after the world’s second largest carmaker, which is likely to file for bankruptcy soon, said that GM Daewoo will be incorporated into a ``good GM’’ even if the company files for bankruptcy. In case of bankruptcy, GM plans to incorporate its viable affiliates into a ``good GM’’ or ``new GM.’’
``I think GM Daewoo should be in a good GM. We strongly recommend that. If GM files for Chapter 11, which is possible, then I would expect GM Daewoo will be in a good GM,’’ Nick Reilly, head of GM Asia Pacific, told reporters in Seoul after talking with the KDB on Thursday.
He stressed that Korea and GM Daewoo is very important for the ill-fated company. ``GM has invested huge amount of money in Korea. We have increased the level of employment after acquiring GM Daewoo in 2002. We are having a discussion with KDB about future financing plan. As I said before, we don’t have any desire to sell shares to anybody.’’
But Reilly ruled out the possibility of co-management of GM Daewoo with KDB, saying, ``KDB already has three members on the board of directors of GM Daewoo. That is working very well.’’
The meeting came as the U.S. carmaker moved a step closer to its own bankruptcy protection filing, as no breakthrough has yet been made between GM and its creditors. Washington is highly likely to buy up to a 70 percent stake in the firm and set up a new GM, which many believe will affect its Korean arm.
During the meeting, KDB also asked GM to turn over technology licensing rights and relocate an engine manufacturing plant in Australia to Korea in exchange for financial assistance.
The state-run KDB holds a 28 percent stake in GM Daewoo, with the remainder being controlled by GM. GM Daewoo has asked since February for KDB to provide 1 trillion won ($795.6 million) in financial assistance, but the lender has been reluctant to give aid, citing uncertainty surrounding the U.S. automaker.
``The management is not the issue. We want GM to promise its long-term commitment to its Korean unit as the fate of GM Daewoo will depend on how the U.S. parent company will be committed to long-term growth for the Korean carmaker,’’ another KDB official said.
If GM does not include GM Daewoo in a good GM, it is highly probable that the Korean automaker will go into court receivership.