Countdown starts for final bankruptcy of Daewoo Motor

Troubled Daewoo Motor faced the crisis of going bankrupt Tuesday. The ailing automaker failed to honor 44.5 billion won of bills for goods it defaulted on due Monday by the final deadline of Tuesday afternoon.

The company asked the creditors to extend the time for the settlement and the proposal was accepted for the moment.

Labor and management engaged in a heated debate over a single self-rescue plan, but failed to reach an agreement that could be accepted by the creditors.

Creditors have said they will deny the troubled firm fresh loans, noting that they are not satisfied with the provisional agreement between labor and management on the self-rescue plan.

It is still unclear whether the nation's second largest automaker will be able to avoid final bankruptcy.

If the company finally goes belly-up, it will automatically be disqualified as one of the companies subject to workout and creditors will eventually ask for court receivership. The creditors plan to continue negotiations with U.S.-based General Motors (GM) on the sale of the company under the state of court receivership.

In this case, the selling price is expected decline sharply, and a chain of bankruptcies of Daewoo Motor's subcontractors looks inevitable.

Daewoo Motor's chairman and the firm¡¯s labor union leader held rounds of talks during the day to prepare a single labor-management self-rescue plan and tried, in vain, to persuade unionized workers to accept it.

Park Sang-Bae, executive director of the Korea Development Bank (KDB), the main creditor bank of the ailing firm, said, "We examined the labor-management provisional agreement, but it is not entirely satisfactory. We will listen to other creditors if the management obtains the labor union¡¯s official approval of the plan."

The creditors are demanding strong self-rescue efforts that will enable the motor company to shift to a surplus in income from operation. But the union maintains the position that it is hard to agree on unilateral layoffs, heralding further trouble for the negotiations.

Park said that the KDB would not be the first to help Daewoo Motor prevent its final bankruptcy, noting that everything would be decided in the meeting of all creditors.

Some industry sources feel that it will be unavoidable for Daewoo Motor to be declared bankrupt and put under court receivership as some creditors maintain that they will not offer the firm fresh loans even if the union approves the self-rescue plan.