Daewoo Woes Discounted--Pres.

SEOUL--Daewoo’s woes are greatly exaggerated, according to Young-Kook Lee, the company’s president. He takes issue with the notion that “reorganization under court receivership” is a bad thing. Lee said the action is mainly aimed at reducing the influence of the union representing the workers.

“While some media coverage has referred to this as bankruptcy, the process in Korea differs from that of the meaning generally known,” said Lee. “In reality, this is an extremely positive step that serves to re-establish Daewoo Motor as a strong and healthy company and to expedite the transition of ownership currently in process,” he said.

“Entering into court receivership was, in fact, a strategic step which was taken intentionally and with positive intent by Daewoo Motor in conjunction with creditors and the Korean government. Several years ago Kia Motor Co. and Samsung Motor Inc. in Korea took similar steps to overcome such difficult situations, resulting in a very favorable outcome for both companies,” he explained.

Daewoo’s current state is “considerably more favorable” than that of Kia or Samsung, according to Lee.

“Specifically, Daewoo Motor Co. is in the process of restructuring and realigning the organization to result in reduced overhead expenses and a near-term return to profitability worldwide. This ‘self-rescue’ plan involves significant adjustments to corporate staffing in Korea, involving layoffs, salary reductions and other difficult sacrifices,” he said.

“Unfortunately, a serious obstacle to that restructuring has been related to the labor union representing the assembly line workers, and its unyielding refusal to concur with a necessary staffing reduction. Lacking any other viable alternative, Daewoo Motor entered into court receivership as a strategic move to overcome this union’s unreasonable resistance to staffing reductions. Daewoo Motor is now solidly positioned to proceed with concluding the transition of the company to a new owner on an accelerated basis,” he said.

“Discussions with General Motors are ongoing,” said Lee, who did not discuss the possible reactions to his plan from the United Auto Workers.

“Reorganization under court receivership in Korea is a much less imposing process than bankruptcy elsewhere in the world,” Lee said. “With the special involvement and support of the Korean government, parts and component suppliers will be paid in full under court receivership. This assures full protection for the suppliers of parts and materials to Daewoo Motor, and assures the continued flow of materials to sustain scheduled vehicle production,” he said.

“Additionally, under Korean law, union activity is very limited under a scenario of court receivership, assuring that there will be no union-imposed interference in the continuation of vehicle production,” Lee said. “As well as assuring our capacity to continued vehicle production during this transitional period, this likewise serves as assurance of a continuing flow of vehicle spare parts to domestic and worldwide markets.”