GM signs final deal with Daewoo, India not in plan

Interestingly, General Motors India (GMI) has not completely ruled out a future association or acquisition of Daewoo Motors India. GMI spokesperson P. Balendran said, “There is no possibility of GM India taking over Daewoo Motors India as of now because of its huge liabilities.” Daewoo subsidiaries, which have not been included in the final agreement with GM, would be the responsibility of the parent company in Korea.

Sources said the Delhi High Court has put restrictions on Daewoo Motors India on transferring, alienating or parting with its assets till further orders. The court has also directed that the Union government cannot invoke the bank guarantees, provided they are kept alive by the company.

“There is no option but to restructure the company now with the help of Indian FIs,” observed an industry expert. Interestingly, the first charge on the assets of Daewoo India lies with the Indian FIs. There are no guarantees on loans extended by Korean FIs, said a source.

Kim said, “We are in talks with the headquarters in Korea and may also discuss the issue with Indian institutions. We do not have a clear idea right now.”

GM will invest $251 million for a 42.1 per cent equity stake in the new company, which is yet to be named. Daewoo creditors will hold 33 per cent while certain GM business partners will share the remaining 24.9 per cent stake. GM has acquired nine sales subsidiaries including those in Austria, France, Germany, Italy, Spain, Puerto Rico, Switzerland plus Daewoo’s European parts operations in the Netherlands and three manufacturing units at Changwon and Kunsan in South Korea and the automobile operations in Hanoi, Vietnam.

The plant in Bupyong, South Korea, which has not been acquired, will remain open and continue to supply the new company with vehicles, engines, transmissions and components for at least six years. The agreement gives the new company an option to acquire this plant any time within the next six years.

GM has said the new company vehicles will continue to be marketed under the Daewoo brand name in Asia. “Our final marketing plans for Asia-Pacific are under review and will be communicated over the next two to three months—the time taken to complete all transactions,” GM said in a press release.