GM meets Daewoo union as sale progresses

SEOUL, March 18 Reuters is reporting that General Motors Corp held its first talks with Daewoo Motor Co's union on Monday, a union spokesman said, in an apparent effort to clear a key obstacle to a $400 million takeover of the bankrupt South Korean firm.

U.S. automaker GM agreed a memorandum of understanding (MOU) in September to buy four plants and other assets from South Korea's third-largest automaker by sales, but needs agreement from Daewoo's militant union for the deal.

Union spokesman Choi Jong-hak told Reuters workers were seeking job security, the reinstatement of more than 1,000 employees laid off last year and a clear plan of how GM intended to use Daewoo's main production plant in Pupyong, west of Seoul. The Pupyong plant was not included in the MOU.

Daewoo's management and its creditors have been trying to persuade the union to revise a collective bargaining contract that requires the union's support for any sale of assets or layoffs. Hardline unionists fear a sale to GM would lead to further job cuts.

``We met with GM officials and told them what we want,'' Choi Jong-hak, a spokesman for Daewoo's union, told Reuters.

The meeting, presided over by GM's general manager for Asia Pacific operations, Larry Zahner, and Daewoo Motor president Lee Young-kook, ended without a decision on further talks, Choi said.

Until now, officials at Daewoo have served as negotiators with union workers during more than a year of talks with GM.

GM spokesman Rob Leggat declined to confirm the labour talks, but said the company expected to quickly wrap up a final deal to buy Daewoo.

Shim Sang-hoon, a spokesman for Daewoo's main lender, state-run Korea Development Bank (KDB), said there had been significant progress in the deal talks.

Analysts view the sale of Daewoo's core operations as a litmus test of the South Korean government's willingness to wean financially troubled companies off life-support provided by lenders, much of it state-invested.

A successful acquisition would give GM greater access to one of Asia's fastest-growing automobile markets.

Shares in Daewoo Motor Sales Co , the listed marketing arm of Daewoo Motor, ended up by their daily 15 percent limit at 6,800 won.

Analysts said GM would need the support of Daewoo's union to make the acquisition profitable.

``GM could adjust R&D and materials costs,'' said Song Sang-hoon, an auto analyst at Dongwon Economic Research Institute. ``But a revision in the collective bargaining contract will be needed to control labour costs.''

Under the MOU, Daewoo's lenders would invest $197 million in the new GM-owned company, which would issue $1.2 billion of long-term preferred shares. In addition, the new company will assume around $830 million of liabilities.

Another creditor bank official told Reuters earlier this year GM was interested only in nine of Daewoo's 22 overseas affiliates.