GM to pay Daewoo US$1.1b

GM to pay Daewoo US$1.1b

SEOUL (AFP): General Motors Corp. (GM) has agreed in principle to pay some 1.US$1 billion to take over the ailing Daewoo Motor Co., a newspaper report said Tuesday.

The Maeil Business Newspaper quoted an unidentified senior government official as saying that GM and creditors of Daewoo Motor would sign a memorandum of understanding to that effect next week.

"I understand that a major progress has been made in the negotiations between the Korea Development Bank (KDB) and GM, wih the two sides reaching a tentative agreement on key points of contention," he said.

"A memorandum of understanding is expected to be signed next week, following a policy coordination meeting of economic ministers," he was quoted as saying by the economic daily.

A KDB spokesman, however, said that GM and KDB had not yet reached any agreement on key issues, including pricing.

The biggest problem has been the fate of the company's ageing Pupyong plant at Inchon, 40 kilometers west of Seoul. GM has rejected the factory -- the company's largest -- because of its antiquated state.

According to the newspaper, GM will not buy the Pupyong plant but act as manager of the plant. Earlier reports said GM would also help the plant sell its cars abroad through GM's global sales outlets.

Pupyong, built in 1972, only returned to profit in the middle of this year after major job losses and other drastic cost cutting. The union at Pupyong was involved in major clashes with riot police over the layoffs.

The US auto giant reportedly does want to buy more modern Daewoo Motor plants in the southern cities of Kunsan and Changwon. The Kunsan plant produces Daewoo's Nubira compact cars and Changwon rolls out mini cars and commercial vehicles.

Daewoo Motor collapsed in November last year with an estimated $17.5 billion of liabilities.