New auction opened for debt-ridden Daewoo Motor

New auction opened for debt-ridden Daewoo Motor

SEOUL (AFP): Creditor banks of Daewoo Motor Co. on Monday opened a new auction for the bankrupt South Korean car firm following Ford Motor Co.'s withdrawal from a US$6.9-billion takeover deal.

The chiefs of five major creditors of the auto company and Daewoo's restructuring committee sought fresh bids from General Motors Corp. and DaimlerChrysler, which had taken part in an earlier auction with Ford.

Ford had been named the preferred bidder in June after it beat DaimlerChrysler, allied with South Korea's top automaker Hyundai Motor Co. and a joint bid by General Motors (GM) and Fiat of Italy, in an earlier auction.

But Ford dropped its bid last week after studying Daewoo's finances for three months.

Korea Development Bank chief Uhm Rak-Yong said General Motors and the DaimlerChrisler-Hyundai consortium were asked to send their proposals by September 28.

"GM and the Hyundai-DaimlerChrisler consortium are required to send their bids within 10 days," he said.

Creditors hope to pick the winning bidder next month, he said, and Daewoo Motor would get fresh finance if needed. The Korean auto company has been kept alive with special loans since its collapse in August last year.

"We are offering good terms. The winner will be allowed to sign a preliminary contract even before his acquisition of Daewoo Motor. That means money can be paid later," Uhm said.

Financial officials promised to complete Daewoo's sale by October 20. They said Daewoo's management would be turned over soon after the contract was signed.

Jitters partly caused by the failed Daewoo deal caused a crash on the Seoul stock market. But World Bank regional chief economist Masahiro Kawai said in Tokyo that Daewoo would not derail South Korea's economic recovery.

"The Daewoo case is symbolic and it's very important this kind of deal go through. But even if that failed, I don't think it's the end of the Korean recovery, which is very broad-based."

But Ford's withdrawal triggered an eight percent stock market fall Monday, with investors concerned over the delay of restructuring.

"It could not be worse than it is now ... Ford's walking away from Daewoo Motor has dealt a big blow to the market," said Daishin Securities analyst Seo Hong-Suk.

Investors worry the Daewoo auction may fall apart, he said, adding Hyundai has insufficient funds to take over Daewoo Motor. DaimlerChrysler also looked less interested in making a new bid.

GM has said it would like to resume talks with Daewoo.

But analysts said GM may show less interest in Daewoo Motor because of book-rigging by Daewoo Group subsidiaries.

Prosecutors will start work this week on the biggest corporate scandal to hit South Korea after Daewoo Group leaders were accused of a $20-billion accounting fraud.

The Financial Supervisory Commission has said 15 trillion won ($13.3 billion) of debts were left out of accounts and asset values were inflated in what has been seen as a desperate attempt to convince creditors to put up more money.

Daewoo Group, once South Korea's second largest conglomerate, collapsed last year under $80 billion of debt, in the world's biggest bankruptcy. The collapse left South Korea's already weak banks with billions of dollars of extra bad loans.

Analysts warned creditors risk heavy losses as Daewoo Motor's debt has been growing. Daewoo Motor's borrowings amount to 13.8 trillion won ($12.3 billion).