Dispute Over Sales Of Daewoo Automobile At Giveaway Price

It was reported that the U.S. General Motors (GM) offered 800 billion won for taking over Daewoo automobile. Dispute over `sales for dirt-cheap` is anticipated since the price is only one tenth of $ 7 billion (including Ssangyong cars), which was offered by the Ford Automobile at the bid last year. The negotiation over sales of Daewoo automobile has reached a deadlock, confirming each other’s position. The third negotiation date has not been scheduled yet.

It was also reported that GM will take over only the fixed assets such as factories and buildings, excluding the Daewoo’s receivables (approximately 2.2 trillion won). A high-ranking government official said on Sunday that ``the negotiation is not going well because the money offered by GM is under 1 trillion won. Although GM plans to establish a new corporation through the purchase and assumption (P&A), it is not clear whether it will take over the Bupyong factory.``

Regarding this situation, a financial circle views that GM intends to take over the Daewoo automobile at a cheap price by taking advantage of the Korean economic situation which is facing difficulties. Moreover, the Daewoo’s receivables were excluded from the list of GM’s take over, since they were likely to be inflated through the window-dressing and it was not clear whether they were repaid. It is anticipated that the assets, which will be taken over by GM, is to be much lower than the book value because it was decided to follow the market value, which is the international standard.

A government official said, ``GM intends to take over healthy assets as well as trade network, which are necessary for the domestic automobile business. Therefore, Daewoo automobile`s frailty will remain in the existing corporation.`` Moreover, GM is demanding the `put-back option` (100 percent cover for loss) with regard to the warranted free repair, which is provided to the customers when Daewoo sells the new car. This was brought out as one of the major issues of negotiation.

Kim Do-Young nirvana1@donga.com