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KDB skeptical about talks with General Motors on GM Daewoo
SEOUL, Sept. 24 (Yonhap) -- Officials at South Korea's state-run bank expressed skepticism Thursday over talks with General Motors Co. to provide fresh loans to keep afloat the local unit of the U.S. carmaker.
Since February, cash-strapped GM Daewoo Auto & Technology Co. has been in talks with Korea Development Bank (KDB) to receive about one trillion won (US$835.8 million) in new loans after exhausting a $2 billion credit line.
The negotiations have faltered on GM's refusal to offer part of its GM Daewoo stake as collateral, as requested by KDB, which owns a 27.97 percent stake in GM Daewoo.
With no major progress reported, GM Daewoo said early this month it will raise 491.2 billion won in a rights offering in October to secure working capital.
GM holds a 51 percent stake in GM Daewoo with KDB and other GM partners owning the remainder. It remains uncertain whether KDB will participate in the new-share offering.
South Korean officials say GM and KDB will hold last-minute talks on around Oct. 14, when GM Chief Executive Officer Fritz Henderson visits Seoul.
But prospects for the negotiations set for next month are still highly uncertain as South Korean officials want GM to do more to get financial support from the state-run bank.
"The amount of money to be raised by GM is significantly insufficient. So, we demand (GM) raise more money," said a high-ranking official at KDB.
To smoothly operate GM Daewoo over the next two to three years, the local subsidiary of GM needs as much as 900 billion won, according to the official.
Unless GM accepts the demand, KDB won't participate in the new-share offering, said another official at KDB.
On Tuesday, Jay Cooney, vice president of communications and public policy for GM Daewoo, also reacted with caution to the talks with KDB, saying "Negotiations are slower than we expected."
Hit by the financial woes of its parent and the global economic crisis, GM Daewoo posted a net loss of some $700 million last year.
In the first eight months of this year, GM Daewoo's auto sales plunged 45.4 percent from a year ago to 344,444 units.
GM Daewoo was created in 2002 after GM acquired Daewoo Motor Co., the automobile manufacturing unit of the collapsed Daewoo Group.
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