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.