Speculation in Seoul is the General Motors Corp.-Fiat Auto SpA alliance may scale back its interest in beleaguered Daewoo Motor Co. Ltd. to a couple of car factories and its domestic distribution arm.

Worse, as far as Daewoo's creditors are concerned, the estimated offering price in such a truncated transaction would be about $1 billion — a far cry from the reported $4.2 billion to $5 billion GM offered in its preliminary bid for all of Daewoo last June. There's also the possibility that GM may pull out of current negotiations on the grounds that Daewoo, which last week reported it lost $1.25 billion in the first nine months of 2000, no longer is a viable investment.

“I would be very surprised if GM offers to take over any of the overseas assets,” says Samsung Securities automotive analyst Mark Barclay. “I think they're really interested in just a couple of domestic factories, one of which will be the fairly new Kunsan plant.”

Even a bid for all of Daewoo likely now would fetch only about $2.5 billion, Mr. Barclay estimates. That's not far off from what Ford Motor Co. reportedly offered for major parts of the company in September, knowledgeable insiders say.

The slow pace of early negotiations with GM is being blamed on the lack of a deal with Daewoo's labor unions that would allow 3,500 jobs to be eliminated (see Ward's Automotive Reports — Nov. 13, '00, p.5). Unions last week refused to bow to pressure from President Kim Dae-Jung publicly to agree to those job cuts. “Daewoo is losing about 100 billion won ($88 million) every month, and layoffs of unnecessary workers should be allowed to keep the firm afloat,” Mr. Kim told the Korean media last week. “If Daewoo Motor implements restructuring, the government definitely will keep it alive.”

If GM walks away or scales back its offer, it could re-open the door to Ford, analysts say.

Asked about that possibility, Han Young-Chul, Daewoo's managing director responsible for the sale and transition of company assets, says, “If Ford told me they wanted to come back in, I personally would be very excited.”

However, he says no such approach has been made. “If they are serious about this I think we would have been contacted,” he says.

Asked about whether GM may only bid on a piece of Daewoo, Mr. Han replies, “It's anybody's guess.”