Daewoo Car Plants Halt Operation

Wednesday August 28,

SEOUL, South Korea AP is reporting that all three car plants of Daewoo Motor Co. suspended operation Wednesday after its largest parts supplier stopped shipping parts to protest delays in payments.

The suspension, if prolonged, could disrupt General Motors Corp.'s agreement to take over Daewoo Motor's passenger car assets, said company officials and experts.

Korea Delphi Automotive System Corp., which makes air conditioners and steering and other key equipment for Daewoo Motor, stopped supplies Tuesday. Korea Delphi accounts for 20 percent of Daewoo's parts supplies from outside firms.

Separately, an association of 191 parts suppliers for Daewoo Motor has threatened to stop supplies Thursday to protest overdue bills.

"We are concerned that the suspension of operation ... would affect General Motor's agreed acquisition of Daewoo Motor assets," said Hwang Nam-churl, a Daewoo Motor spokesman.

In April, GM agreed to set up a new joint venture with investors and Daewoo's creditors to take over the bankrupt South Korean firm's key passenger car assets.

GM and Daewoo Motor hoped to launch the joint venture in early October. But stumbling blocks remain, including a dispute over how to deal with the outstanding debts to parts suppliers.

If Daewoo Motor's production halt lasts long, GM may have to delay the planned takeover of Daewoo Motor, said Suh Sung-moon, an analyst at ING Baring Securities.

Daewoo Motor's creditors are reportedly considering new loans for the cash-strapped parts suppliers to help persuade them to resume shipments.

Kim Hag-ju, an automobile analyst at Seoul's Hyundai Securities, estimated that Daewoo Motor may incur a daily production loss of 18.7 billion won ($15.6 million), equivalent to 1,700 units.

Daewoo Motor, the third largest among South Korea's five car makers, has been suffering under huge debts since the 1997-98 Asian financial crisis.