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

Edward Niedermeyer
by Edward Niedermeyer

$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?

Edward Niedermeyer
Edward Niedermeyer

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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?

  • FreedMike Interesting time capsule.
  • 6-speed Pomodoro I had summer and winter tires for a car years ago. What a pain in the butt. You've permanently got a stack of tires hogging space in the garage and you've got to swap them yourself twice a year, because you can't fit a spare set of tires in a sportscar to pay someone else to swap 'em.I'd rather just put DWS06's on everything. But I haven't had a sportscar in 8 years, so maybe that's a terrible idea.
  • ShitHead It kicked on one time for me when a car abruptly turned into my lane. Worked as advertised. I was already about to lean into the brake as I was into the horn.
  • Theflyersfan I look at that front and I have to believe that BMW and Genesis designers look at that and go "wow...that's a little much." Rest of the car looks really good - they nailed the evolution of the previous design quite well. They didn't have to reinvent the wheel - when people want a Mustang, I don't think they are going to cross-shop because they know what they want.
  • Theflyersfan Winters go on around Halloween and Summers go on in late March or early April. However, there were some very cold mornings right after the summers went on that had me skidding a bit due to no grip! I do enough (ahem) spirited driving on empty hilly/mountain roads to justify a set of sticky rubber, and winters are a must as while there isn't much snow where I am (three dustings of snow this entire winter), I head to areas that get a bit more snow and winter tires turns that light, RWD car into a snow beast!