GM Buys Up Daewoo Share Offering, Increases Stake to 70 Percent

Edward Niedermeyer
by Edward Niedermeyer
gm buys up daewoo share offering increases stake to 70 percent

$413 million isn’t a ton of money for one of the largest global automakers, but GM’s purchase of Daewoo’s entire share offering still doesn’t completely add up. After all, GM was barred from spending US taxpayer bailout money on overseas assets. And it’s not like GM wanted to increase its stake from 51 percent to 70.1 percent; GM-Daewoo tells Reuters GM had to step in with the cash when the Korean Development Bank, SAIC and Suzuki declined to participate in the rights offering. But under which sofa did GM find the cash? “The money came from GM’s global operations,” is all Daewoo’s reps will say about the matter. And though we could criticize GM for starving its overseas operations in order to keep the wolf from Daewoo’s debt-riddled door, the reality is that few of GM’s divisions are as important as Daewoo for GM’s global product development now that Opel is on the way out the door. The real problem is that this outlay is hardly the last one GM will have to make in order to keep its small-car development hub.

GM’s $413M will be used for “general purposes, including funding the repayment of maturing debt,” according to Daewoo spokesfolks. And they’re already talking about the next round. “Any further actions related to the longer term funding structure of GM Daewoo will be considered if necessary,” is the good word. And it will be necessary. Daewoo owes the Korean Development bank about $2B, and had been negotiating for another $1B in loans. But now that the KDB’s Daewoo stake has been reduced from 28 percent to 17 percent, there’s incentive for the bank to keep funding the struggling automaker. Especially since GM apparently hasn’t agreed to KDB’s key terms, including the size of the rights offer (it was supposed to be closer to $800M . . . what does that tell you?), the sharing of jointly-developed platform licenses and a bank-appointed CFO. And though a $413M bailout is worth the price for GM right now, that was just a stop-gap. If Daewoo is going to be worth anything going forward, GM has to not only handle Daewoo’s debt, it also has to jump-start development work. Now GM gets to learn the lesson it already taught US taxpayers: one bailout usually leads to another. But where’s the money going to come from?

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  • Robbie Robbie on Oct 26, 2009

    @CyCarconsulting Our tax dollars are not helped by giving GM communist-style directives on how to run their business. If we start forcing GM to make bad business decisions, then Obama will need to start writing even bigger checks. GM apparently feels it needs some engineering capability after the loss of Opel, so this may very well be a sensible decision.

  • Pista Pista on Oct 27, 2009

    So does Daewoo no longer belong to Holden or is that who "paid" the money?

  • Azfelix From certain angles the bonnet appears oversized with respect to the rest of the car - like a skinny teenager wearing a bulky sweater nicked from her older sister's wardrobe.
  • Tassos This is way too god damned OLD, 21 years old to have all the necessary options you need TODAY. You need a 10 year old or less car. AND if you give us THIS POS, a 21 year old model, that is not even a LUXURY car, whoever pays $10k for a Golf, And I Do NOT care what anniversary it is (they are all UTTERLY INSIGNIFICANT) deserves to get this MOST UNRELIABLE AND COSTLY TO REPAIR OF ALL LOUSY ECONOBOXES< EVEN THE DOMESTICS AND THE KOREANS.
  • Tassos As you say, Toyota confirmed this on TUESDAY. Today is WEDNESDAY. Why is everything on TTAC held back one or more days before you tell us the NEWS when it is NO MORE THE NEWS?
  • MRF 95 T-Bird You can find a decent and far more stylish Audi TT or an S4 of a similar vintage for under $10k.
  • RHD "In all situations, the grip of the tires (225/40R18 front, 225/35R18 rear) brings with it road noise."Are the rear tires actually smaller than the fronts??!! Adding just a bit of sidewall would take care of the bumps and rough ride. I'm not a fan of BMWs, personally, but this is a very enjoyable car. There are times when driving a convertible is pure bliss, and with a bit of power it's fun as well. (And certainly a better drive than a gussied-up, overpriced German taxicab!)