Impending Sale of Daewoo Motor

Daewoo Motor Co. is expected to make a deal with the General Motors (GM)-Fiat consortium soon. The negotiation team of the GM consortium will visit Seoul in order to submit an official takeover bid for the Daewoo Motor on 28th.

Jung Gun-Yong, the president of Korea Development Bank (KDB), told that the ``GM seems to hesitate to submit a takeover proposal in order to find out a reasonable price and proper terms of the takeover. It is for sure that the GM has the intention to take over.`` And he added that the submission of the takeover proposal is impending.

But the negotiation will not proceed easily because the GM has not fully expressed the intention to take over the Bupyeong Plant.

However, since Daewoo Motor`s operation profit turned into the black (6.7 billion won) for the first time in April through the reduction of the cost since July of 1998, it will have a positive effect on the negotiation price.

- The Negotiation Team Visit to Korea

The officials of the GM told that the negotiation team led by the GM Asia-Pacific President Rudy Schlais and Allan Perriton, the GM Asia-Pacific director in charge of M&A affairs, will visit Korea on 28th. An actual person in charge in this negotiation will be Director Allan Perriton.

But one of the negotiation team members told that the final contract will be made in August because the close examination should be conducted for two or three months after the takeover proposal is submitted and the memorandum of under-standing (MOU) is agreed between two parties.

Hence Daewoo Motor is expected to wait for two more months to submit the liquidation plan to the Inchon District Court due to the delayed final contract.

- Bupyeong Plant is the Most Difficult Obstacle for the Completion of the Negotiation

The GM has declared thus far the intention to take over the Kunsan Plant and the Changwon plant through the `Purchase & Assumptions`(P & A) after creating the new corporation.

The domestic creditors have reviewed the plan to transfer the loaned money of the Daewoo Motor to the new corporation and to switch it to the asset. Therefore, even though the creditors sell the Daewoo Motor, they will only receive stock shares of the new corporation, not the cash.

The most difficult hurdle for the negotiation is whether the GM will take over the Bupyeong plant or not. The GM has hesitated to take over the Bupyeong plant for the reasons that its productivity has been low and its labor union has taken a hard-line.

On the other hand, the Korea Development Bank has planned to suggest for the sale of the Bupyeong plant based on the incentives in collaboration with Inchon city, such as the reduction of the local taxes like an acquisition tax and a registration tax, the permission of the transfer of Bupyeong plant to the Song-do site, and the permission of the change of the existing Bupyeong plant site to the commercial site.

These proposed incentives will make the negotiation more easily, but they will also generate the controversial dispute over the preferential treatment of the foreign company.

And because the GM has requested the Daewoo labor union to declare no labor dispute for 3-5 years and to reduce the workers, the GM is expected to have severe conflicts with the Daewoo labor union that has taken the hard-line.

Kim Do-Young nirvana1@donga.com