GM-Daewoo Stayin' Alive. Barely.

An interview with Forbes the boss of the Korean Development Bank, which GM-Daewoo still owes several billion dollars, reveals that GM’s South Korean unit had a debt-to-equity ratio of 912 percent as recently as last June. GM “rescued” its crucial small-car development center by buying up all $413m of GM-Daewoo’s recent share offering, keeping the the KDB from imposing its will on the automaker. That was enough to keep the wolf from Daewoo’s door in the short term, but if Daewoo is ever going to develop a new generation of GM small cars and global products, it will have to address its $2b KDB debt and raise additional funds. For now though, GM-Daewoo is just hoping to keep a little momentum going.

Thanks to the already-developed Lacetti Premiere (Chevy Cruze) and Matiz Creative (Chevy Spark), Daewoo has new products that are actually selling quite well. Daewoo’s December sales were up 65 percent, to their highest level since 2006 on the strength of those two new models. But, as the Korea Times reports, quality issues are dogging those models. Airbags and windshield wipers have already proven to be a trouble point on the Spark, while seatbelts and software troubles have marred the launch of the Cruze. Presumably GM will fix these issues before the models debut in crucial markets like the US, but in the damage has already been done in Korea where GM-Daewoo’s market share dropped from 10.7 to 8 percent last year, despite the year-end surge.

But despite the thoroughly mixed picture coming out of GM’s Korean operations, GM-Daewoo’s executives remain blithely optimistic. “We’re self-sufficient. We are generating cash and don’t need a line of credit. We’re starting 2010 with a very very strong cash position,” Daewoo President and Chief Executive Mike Arcamone tells Reuters. Huh? There’s no way that the less than half-billion dollar cash injection made a game-changing impact on GM-Daewoo’s 900 percent debt-to-equity position. So what gives? Arcamone credits “aggressive cash conservation efforts over the past year and improving auto industry conditions,” for his assessment.

The “cash conservation” aspect is definitely the crucial element, and it’s not something that GM can afford to keep up if it wants Daewoo to continue developing so many of Chevrolet’s global products. And with GM injecting hundreds of millions into Opel with no sign of European governments offering to lend a hand, there are just too many hungry mouths abroad for GM to save them all. If Opel is really supposed to be a more independent division going forward, look for GM to send more taxpayer cash to South Korea. Or, at the very least, to shift some of its exposure to Daewoo to its Chinese partners along the lines of its recent India strategy.