SEOUL-Corp.’s attempts to acquire the assets of bankrupt Daewoo Motor Co. Ltd. have stalled for the second time in two weeks, following the resignation of the Daewoo negotiating team’s managing director, Han Young-Chul. No decision has been made as to where or when talks will resume.
Negotiators for both sides met for a second time in Hong Kong on June 21 to try and iron out price and other differences that precipitated the abrupt breakdown a week earlier.
But on June 23, Governor Jung Keun-Yong, of the state-run Korea Development Bank (KDB), Daewoo’s chief creditor, again recalled the Daewoo side to Seoul, reportedly very unhappy that GM would not sweeten its earlier offer, rumoured to have been less than US$1billion.
Both sides first met in Hong Kong on June 4, ostensibly to hammer out a detailed memorandum of understanding (MOU) by the middle of the month. This document was to serve as the basis for a follow-up definitive agreement.
Reportedly, when Mr. Jung was apprised of GM’s offer, he abruptly broke off negotiations and recalled the Daewoo team. This action is said to have actually stunned GM negotiators, who also left Hong Kong. A KDB spokesman commented to news media at the time that the GM monetary offer had been “insultingly low.”
But Ward’s Automotive International has learned that the first breakdown in negotiations coincided with the resignation of Daewoo’s Mr. Han. The chief negotiator weeks earlier had made a commitment to accept the post of president and chief executive officer of Volvo Truck Korea but planned to stay in negotiations until the detailed MOU was signed. He was confident that this could be achieved by June 15. With talks stalled and little progress being made, Mr. Han ran out of time.
Soon after the first talks ended, Mr. Jung asked GM to return to the negotiating table in Hong Kong. GM complied, but within two days KDB broke things off again. Sources say the negotiations are politically charged and KDB officials, especially Mr. Jung, don’t want to be blamed if the process breaks down, or if the deal goes through on somewhat unpalatable terms. On the other hand, KDB wants the accolades if it is able to persuade GM into a better deal.
With Mr. Han no longer speaking from the automotive industry’s perspective that GM is comfortable with, the Daewoo negotiators are at a disadvantage, some analysts believe. GM now is left to bargain with a team commanded by a government-owned bank that is highly interested in saving face politically but not well versed in the practical requirements of the auto industry.