Korea Delphi to End Daewoo Motor Boycott

Tuesday September 10, 2002

SEOUL Kim Myong-hwan writing for Reuters reported that Korea Delphi Automotive Systems, the biggest parts supplier to Daewoo Motor Co, has decided to end a boycott that has stopped production at South Korea's third largest carmaker for two weeks, a Daewoo spokesman said.

Korea Delphi, which provides about 20 percent of Daewoo's parts, stopped deliveries on August 28 demanding payment for parts.

"Korea Delphi informed us it would resume parts supplies from Wednesday," Daewoo spokesman Kim Sung-soo told Reuters on Tuesday. "Daewoo Motor will also be able to begin operations immediately."

Analysts said widening losses had probably pushed Korea Delphi to decide to resume parts supplies to Daewoo Motor.

"Financially weak Korea Delphi could not fight properly with creditors for long," said Song Sang-hoon, analyst at Dongwon Economic Research Institute.

Korea Delphi, a joint venture between U.S. firm Delphi Corp and former Daewoo units, makes brakes, steering and airconditioning systems.

The boycott had cost Daewoo about 15 billion won ($12.54 million) in lost production a day. Korea Delphi, which relies on Daewoo Motor for about 70 percent of its sales, had lost about 2.0 billion won worth of deliveries a day.

Korea Delphi posted a net loss of 69.2 billion won in 2001 on sales of 562.7 billion won, hit by frequent work stoppages at Daewoo Motor, which stemmed from a union opposition of creditors' plan to sell the automaker to General Motors.

GM agreed in April to lead a joint venture to revive Daewoo as GM Daewoo Auto & Technology Co, which is expected to launch later this month or in early October.

The world's largest automaker has said the parts makers' boycott is not expected to postpone the launch of the joint venture because of the bright future of the new firm.

GM will take a 42.1 percent stake in the venture, while Japanese small-vehicle maker Suzuki Motor Corp (Tokyo:7269.T - News) will take a 14.9 percent stake. A 10 percent stake is to be taken up by a GM partner firm and Daewoo lenders will hold the remaining 33 percent.

Delphi President Bae Gil-hoon tendered his resignation late on Friday, sparking media reports that said Delphi might be set to end its boycott.

Company officials had dismissed the reports on Monday, saying they would stick to the boycott until creditors made concessions.

Shares in listed unit Daewoo Motor Sales Co were up 3.1 percent to close at 8,200 won, outperforming a main index up 2.21 percent.

Some 190 suppliers are pressuring Daewoo and its banks to repay about $700 million in unpaid bills ahead of the pending launch of a GM joint venture.

Last Wednesday, other parts suppliers agreeds to end the boycott, analysts said, because of fears a protracted work stoppage would only deteriorate their already fragile finances.