The South Korean government is growing impatient over talks betweenand bankrupt Daewoo Motor. In its haste to stroke both public opinion and creditor banks, it is not so subtly urging GM to pay more, take more and to do it by the end of this month.
But the Korean politicians are finding it’s not so easy to push the General around. Cajoling, posturing and boldface threats won’t do it. GM has heard worse from shareholders and UAW members.
In fact, the government’s ham-handed efforts would be laughable if they weren’t so pathetic. Though the bureaucrats would have us think otherwise, there is no one waiting in the wings to take over should GM drop out. And almost no one with any business sense believes Daewoo can go it alone, unless its entire $13 billion debt is forgiven by creditors - highly improbable.
There are rumors, most likely started by the finance minister’s office, thatand/or have been asked to consider buying the old and inefficient Bupyeong plant, which builds Daewoo’s midsize cars such as the Leganza, in order to prevent some 7,000 workers from losing their jobs.
The present administration, facing an upcoming election, knows such a calamity would stir an angry public. But GM clearly doesn’t want the aged facility, and the issue has become a major stalling point in the negotiations.
already has walked away from Daewoo once, only months after winning exclusive negotiating rights during last year’s so-called international auction. With all the problems on its plate today, it’s highly unlikely that the U.S. automaker would want to take on a failing Korean car plant. , Korea’s No.1 carmaker, has issued a statement denying that it has any interest.
Daewoo went so far in its most recent court-ordered restructuring plan this month as to completely omit any mention of its talks with GM, painting a scenario instead of how it can pull itself out of its spiraling debt over a 10-year period. Auto analysts are highly skeptical, believing that if GM drives away, Daewoo’s only recourse will be liquidation of its three plants in Korea and 12 more overseas.
Even those industry observers who still believe the two will seal a deal say the transaction could not be wrapped up until year’s end or early next. “It would take at least 90 days to conclude the deal after the signing of a memorandum of understanding and they don’t even have an MOU yet,” says Richard Pyo, of Credit Suisse First Boston (Korea).
Korea’s Incheon District Court says it will decide by Nov. 30 whether to continue protecting Daewoo or order its assets liquidated. Time seems to be running out for both sides. Perhaps the government should back off its insistence that GM up its offer of around $600 million and purchase an assembly plant it doesn’t want. For Daewoo, it may be time to do the deal or die.