Daewoo's U.S. sales arm files for Chapter 11

DETROIT, May 17 Reuters reported that the U.S. sales arm of Korean automaker Daewoo Motor Co. said on Friday that it has filed for bankruptcy protection, three-and-a-half years after it began selling cars in the United States.

Daewoo Motor America was excluded when General Motors Corp. and its undisclosed partners agreed in late April to spend $400 million for a controlling stake in a new joint venture to be formed from Daewoo's key assets, including three assembly plants and sales operations in eight countries outside Korea.

Once GM passed up Daewoo's U.S. sales arm, Daewoo Motor America officials said it was only a matter of time before they folded shop.

GM officials said that most U.S. consumers were unaware of the Daewoo brand, and GM already has the most automotive brands in the U.S. market.

Daewoo Motor America Inc. said it filed for Chapter 11 with the U.S. Bankruptcy Court in the Central District of California in Los Angeles. Daewoo Motor America said the filing was done to protect its assets while it develops a business plan for its remaining unsold cars.

In April, Daewoo of America laid off 105 of its 165 employees. Sixty employees were retained, in the expectation that they would help deal with warranties on Daewoo vehicles until GM completed the acquisition of the assets in two to three months.

Upon completion of the deal, GM and Daewoo Motors of Korea creditors will form a new company to make provisions that honor warranty claims for the approximately 170,000 Daewoo cars in operation in the U.S. market, Daewoo Motor America said in a press release.

Many of the 525 U.S. Daewoo dealerships were upset with the GM deal. Twenty-three dealers in Florida last week filed a complaint with state regulators, asking that the Detroit automaker be forced to honor the terms of their franchise agreements with Daewoo.