SEOUL – General Motors Corp. is puzzled and angry to be left out of the latest reorganization plan that Daewoo Motor Co. Ltd. filed with a Korean bankruptcy court last week, sources close to the matter tell Ward’s Automotive International.

As a result, some industry observers believe GM may be preparing to withdraw from negotiations with the insolvent automaker at the same time Korea’s government may be planning to scuttle the stalemated talks.

Daewoo’s new plan, which requests continued court protection so that the beleaguered automaker can put its latest strategy into effect, outlines how the company can get back on its feet and repay some 17 trillion won (US$13.4 billion) in debt. While it addresses the debt in some detail and shows how the considerable sum can be paid off within 10 years, there is no mention of ongoing negotiations with GM over the sale of Daewoo assets.

GM insiders are fuming over suggestions that the U.S. automaker has not been aggressively pursuing an acquisition deal. “General Motors has been involved in its efforts to acquire Daewoo Motor for three years now, both before and after the auction process was initiated, one source tells Ward’s. "The company has spent millions of dollars, thousands of hours and dedicated hundreds of people to this quest. If this does not mean we are serious about wanting to get the deal completed, then I don't know what does. GM would like to have concluded these negotiations by now."

Korea’s Incheon District Court confirms that the reorganization plan is "a separate plan that is independent of the company's negotiations with General Motors," adding that it will give the plan "positive consideration."

In contrast, a previous plan submitted to the court in June stipulated that an important part of the company's restructuring effort bore directly upon GM acquiring Daewoo’s assets. That plan asked the court to extend the previous deadline date for court protection from May 15 to August 15, based on ongoing and positive negotiations with GM that likely could be concluded within that time frame.

In determining whether this latest restructuring plan shows conclusively that Daewoo can survive on its own, the court theoretically will not consider anything that is not contained in the written filing – including any knowledge about Daewoo's discussions with GM – as it considers the plan’s merits. A decision on whether to continue protecting the automaker from its creditors or order its assets to be liquidated will be made by Nov. 30.

The plan, coupled with recent complaints by public officials over GM's apparent lackluster enthusiasm for the deal, has drawn a public response from GM, which usually does not comment on matters concerning the negotiations.

"The GM team has been conducting sincere negotiations with the intent to reach a successful conclusion for all of the parties involved,” a prepared statement says. “With regard to the announcement by the court and recent media comments, GM is in the process of trying to understand if there are any implications to our negotiations."

Sources close to the matter interrupt the statement to mean that the U.S. automaker may be preparing to withdraw from negotiations should push comes to shove. The feeling is that GM will not stay in the negotiations if it determines that the government doesn't want it to, which could explain why Daewoo would submit a recovery plan to the court that does not involve GM at a time when negotiations are ongoing.

Moreover, some security analysts question the repayment of indebtedness Daewoo says the plan contains. It would be impossible for Daewoo to repay its current debt within 10 years, they say, noting that the automaker in all probability is counting on creditor banks to write down a substantial portion of it.

They also note that the indebtedness mentioned in the plan is considerably lower than what Daewoo acknowledged at the end of the year, which was reported at 22.8 trillion won (US$17.8 billion), while the automaker’s assets were listed at just 9 trillion won (US $7 billion). In either case, only about 13 trillion won (US$10 billion) of the total debt is in interest bearing bank loans. Most of the rest is owed to suppliers and employees.

Richard Pyo, of Credit Suisse First Boston, believes the banks already have provisioned for a write-down of 80% to 90% of the total amount. In that case, he says, Daewoo would be looking at paying back 1.3 trillion (US$1 billion) to 2.6 trillion won (US$2 billion) to the banks and up to 4 trillion won (US$3.1 billion) to other creditors. Given that the total debt to be paid over 10 years would then be about 5.3 trillion (US$4.1 billion) to 6.6 trillion won (US$5.1 billion), payback would still be extremely difficult to achieve, Mr. Pyo says.

While the new reorganization strategy sets up actions that enable Daewoo to rehabilitate itself, it does not necessarily shut out the possibility of negotiations with GM reaching a successful conclusion. Indeed, the plan can be substantially modified up to Nov. 30, a source close to Daewoo confirms. Should a memorandum of understanding (MOU) with GM be completed before then, it could be written into or substituted for the present proposal.

But Daewoo’s new survival plan makes clear that the company is willing to go it alone. Daewoo Motor Chairman Lee Jong-Dae, who also serves as Daewoo’s court-appointed receiver, has stressed on several occasions that he is serious about restructuring the company so that it can stand on its own. "If the GM deal falls through, Daewoo Motor will announce its alternative plan within one hour," he has said.

Korea's Deputy Prime Minister Jin Myun said in a public statement two weeks ago that the government wanted the GM-Daewoo negotiations completed by the end of August and that he was taking personal responsibility to ensure it happened. Last week, however, Lee Keun-Yung, chairman of the government's supervisory commission, conceded that the negotiations were likely to go on for a long time.

"The sale of Daewoo Motor is a vital transaction that not only affects the future of the automobile company but reflects upon the credit worthiness and market stability of Korea," Mr. Lee said at the time. "If the negotiators continue to drag their feet, we will have no choice except to seek an alternative to the GM acquisition."

Since then, Mr. Lee reportedly has said he planned to instruct both Daewoo and GM to conclude their negotiations by August 31. But even if a deal is hammered out by then, the transaction would not be wrapped up until year’s end or even early 2002. "It would take at least 90 days to conclude the deal after the signing of an MOU,” Mr. Pyo, of Credit Suisse, says, “and they don't even have an MOU yet."

Mr. Pyo believes that GM has purposefully been dragging its feet, letting things play out while believing, as Daewoo’s sole bidder, that time was on its side. He notes, however, that GM has been notoriously slow in other like-negotiations. For example, GM negotiated with Poland to take over its FSO car company for five years before Daewoo grabbed the company out from under with a better offer.

Mark Barclay, an automotive analyst with Samsung Securities, also is skeptical that GM wants the deal to happen. GM, he says, has the negotiating advantage yet has not been pushing for a conclusion. "If GM was seriously interested in acquiring Daewoo Motor, they would give the other side an ultimatum and press them to accept it," he says "They seem to be saying: 'If we get Daewoo that's good, but if we don't get it then we're not too worried about it.'"

Ward's,in fact, has learned that GM has developed contingencies to cover both a successful conclusion to the negotiations and an abandonment of the acquisition effort. "They don't want to get stuck in the same awkward predicament Ford was in if things don't work out," an informed source says.

Last September, Ford Motor Co. backed out of negotiations with Daewoo four months after being named sole bidder in a global auction that originally had included GM-Fiat Auto SpA and DaimlerChrysler AG-Hyundai Motor Co. Ltd. Korea President Kim Dae-Jung publicly rebuked Ford at the time for its sudden and unexplained withdrawal.