GM Makes Offer to Buy Closed Daewoo India Assembly Plant

NEW DELHI, March 3, 2004; Arif Sharif writing for Reuters reported that General Motors Corp said it had offered to buy the closed Indian car assembly plant of South Korea's Daewoo to boost its share of a booming car market.

The U.S.-firm said it would use the plant to make a mini-car for the Indian market, helping it take on competitors in the key small car segment, mainly the local units of Suzuki, Hyundai and domestic firm Tata Motors.

Low-priced mini and compact cars make up two-thirds of Indian passenger vehicle sales, which are expected to touch nearly a million this fiscal year, yet GM barely has a presence.

"This facility will allow us to produce a new generation of cost-competitive vehicles that can be marketed through our Chevrolet distribution channels," Frederick A. Henderson, president of GM Asia Pacific, said in a statement.

Shares of Daewoo Motors India Ltd in Bombay leaped the maximum permissible 20 percent to 9.52 rupees on news of the undisclosed offer, valuing its equity at more than $100 million.

GM said Daewoo India's creditor banks accepted the offer for the car assembly arm, subject to regulatory and board approvals. The deal does not include a separate engine and transmission facility that is also a part of Daewoo India's car complex.

A GM India spokesman said the price it would be prepared to pay would be known after it completes due diligence over the next two to three months. Production was expected to begin next year after the facility is refurbished.

Daewoo India, in which its South Korean parent owned over 90 percent, has a capacity to make 85,000 cars a year at its plant on the outskirts of New Delhi. It was India's third-biggest car firm before its parent went bankrupt in November 2000.

A court receiver was trying to sell the assets in parts to repay creditors after its sale as a stand-alone business attracted no bids. About 18 banks, led by ICICI Bank Ltd and Industrial Development Bank of India, had lent over 15 billion rupees ($331 million) to the carmaker.

Before it shut nearly two years ago, Daewoo India made the popular Matiz compact car and the Cielo and Nexia sedans.

GM TO BOOST INDIA PRESENCE

Multinational car firms are already major buyers of Indian car parts, one of the country's most successful industries.

GM's offer to buy a part of the debt-laden Indian unit comes nearly two years after it, along with partners, bought most of the passenger car operations of bankrupt Daewoo South Korea.

A wholly owned unit of GM has been in India since the mid-1990s and produces several variants of the German-engineered Opel Astra, Corsa, Swing, and Sail models and the Chevrolet Optra sedan at its plant in the western state of Gujarat.

But its bigger, expensive models struggle to compete in the Indian market, where small, low-price hatchbacks rule. In the first 10 months of this fiscal year to March, GM had less than two percent share of Indian industry sales.

Some 13 firms, mostly local units of foreign groups, compete in the Indian market for cars, small vans and utility vehicles.

Analysts expect the Indian market to grow nearly 10 percent a year this decade, helped by rising incomes and falling taxes.

Industry sales have surged 31.5 percent in the first 10 months of this fiscal year as robust economic growth and interest rates near three-decade lows have spurred a consumer boom in Asia's third-largest economy.

Daewoo India reported a 1.16 billion rupee loss on revenue of 13.08 billion in 1999/00, its last normal year before its parent's bankruptcy.