- The Washington Times - Friday, September 21, 2001

SEOUL (AP) General Motors Corp. will acquire key operations of bankrupt Daewoo Motor Co. in a deal that would give the U.S. auto giant a stepping stone into the Asian market, company officials said yesterday.

The state-run Korea Development Bank, Daewoo Motor's main creditor, has been leading the negotiations between GM and Daewoo's lenders. Bank spokesman Kim Yong-soo and Lee Key-sup, a spokesman for GM in Seoul, said a deal was expected to be formally announced today.

President Kim Dae-jung's government has been struggling to unload Daewoo Motor, which expanded recklessly on borrowed money during the boom years of the 1980s and the early 1990s. It nearly collapsed with the onset of the 1997-1998 Asian financial crisis.

Through its banks, the government funneled billions of dollars to keep the troubled carmaker afloat. Mr. Kim repeatedly said he was determined to find a foreign investor for Daewoo Motor, billing the sale as a potential milestone in restructuring his country's debt-ridden industries.

Finance and Economy Minister Jin Nyum told journalists yesterday that GM will take over 67 percent of Daewoo's key operations, with creditor banks holding the remaining 33 percent.

Creditor banks, most of them government-controlled, first looked to Ford Motor Co. But Ford abruptly pulled out of negotiations last September. GM entered official negotiations with Daewoo in June.

After the talks with Ford broke down, Daewoo Motor filed for bankruptcy in November with an estimated debt of $17 billion. It has been under court receivership since then.

The International Monetary Fund, which put together a bailout package for South Korea in late 1997, said the country must step up restructuring its heavily indebted corporate and banking sectors to ensure sustained economic growth.

"It certainly is good news that GM will take over Daewoo Motor and operations in Daewoo Motor will financially return to normal," said Yoon Kun-young, an economist at Seoul's Yonsei University.

"But I will give an 'F' to the way the government took so long to unload Daewoo Motor," Mr. Yoon said.

"Because of the delays, I think the government settled for a far smaller price for the company than it could have gotten otherwise."

Domestic news media, quoting unidentified sources close to the negotiations, have reported this week that GM might pay about $1 billion in the takeover.

To sweeten a deal with GM, Daewoo Motor had to lay off one-third of its 22,000 workers.

Daewoo Motor can produce 2 million vehicles a year at 11 plants at home and abroad. Despite its debts, the company can help a potential investor break into South Korea's closed market and advance into China, one of the key targets for future growth for American auto giants.

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