GM, Daewoo differ on remaining hurdles to sale

SEOUL, March 19 Reuters is reporting that General Motors Corp and bankrupt Daewoo Motor Co said on Tuesday they had overcome major obstacles in talks on GM buying the South Korean automaker's assets, but disagreed on the scale of the outstanding issues.

Daewoo President Lee Young-kook said only slight differences remained, but GM spokesman Rob Leggat said the two sides still had to resolve tough issues.

GM, the world's largest automaker, plans to secure a foothold in one of Asia's largest but most insular car markets by finalising a preliminary $400 million deal signed with Daewoo creditors last September.

But Daewoo's militant union opposes the sale, and under a collective bargaining contract the company requires the union's support for asset sales or layoffs.

GM officials sat for their first face-to-face talks with Daewoo's union on Monday, and the meeting ended with labour officials reiterating demands for job security and the reinstatement of more than 1,000 workers laid off last year.

``A lot of major obstacles are behind us. Both sides are optimistic of bringing this to a rapid conclusion,'' Leggat said.

``There are still tough issues that have yet to be resolved,'' he added. ``The collective bargaining agreement remains an open issue.''

But Daewoo's Lee said there were only ``slight differences'', which he did not elaborate on. ``There are no major differences from the MOU (memorandum of understanding),'' he told reporters at the launch of a remodelled Magnus sedan.

Optimism that the deal would go ahead lifted shares of Daewoo Motor Sales Co , its listed marketing arm, by the daily 15 percent limit for a second day to close at 7,820 won.

DEAL HINGES ON LACK OF SURPRISES

Under the MOU, GM agreed to pay $400 million in cash for assets including two Daewoo plants in South Korea and one each in Egypt and Vietnam. Korean banks will have to decide the fate of Daewoo's eight other plants, including two in South Korea.

For GM, the signing of a final deal is ``a matter of them not finding any more surprises'', said Mark Barclay, an auto analyst at Samsung Securities.

Last month, Daewoo's main lender, state-run Korea Development Bank, said it had discussed with GM how to handle potential liabilities stemming from Daewoo's past financial ties to other Daewoo Group [DWGR.UL] units.

The deal has become a litmus test of government willingness to wean weak companies off loans from banks, many of which are state funded, analysts say.

Until the conglomerate collapsed under huge debts in 1998, Daewoo Motor had a 40 percent share of the Korean car market. The passenger car market grew to more than one million vehicles in sales last year, but Daewoo's slice declined to a third.

Still, one attraction for GM is a potential boost to its sales in the huge Chinese market.

``The experience we have built up in adapting to the market in Eastern Europe could serve GM well in the Chinese market,'' Yoo Chang-sun, Daewoo's director of engineering and development, told reporters.

Barclay agreed: ``GM could use Daewoo's smaller platforms to enter China where higher-margin vehicles really don't fit.''

By Samuel Len ($1 equals 1315.5 won)