GM-Daewoo: Grasping At Straws?

Edward Niedermeyer
by Edward Niedermeyer

Bailout and reorganization gave GM the fresh start it so desperately needed in the US, but other governments have been decidedly less sympathetic to GM’s plight. Germany saw an opportunity to free Opel from GM’s grip, and now the Korean Development Bank has GM up against the wall over the future of GM-Daewoo. Reuters reports Fritz Henderson flew to Korea to meet with Daewoo’s creditors and put a cheery face on the situation. But calling the talks “very positive” is more tribute to Fritz’s unflagging optimism than an indication that GM-Daewoo is almost out of the woods. GM has no choice but to fight for its only remaining small car development center, the only question is with what?

GM-Daewoo is so far in debt to the KDB that it has no choice but make a public equity offering, a move that Henderson says he supports. But the issue that the KDB wants resolved is how much GM will contribute to such an offering. Without a sweetened pot, it’s hard to imagine investors going to go head-over-heels for a deeper stake in an indebted, sales-losing, shackled-to-GM carmaker. On the point of this contribution however, Fritz was… incoherent.

GM has resources around the world. Resources can be used not only from the U.S., including operations here in Korea. We are able to provide support, if necessary

The problem is that this is only moderately true at best. Daewoo’s offering will be $425m at minimum; the KDB wants that amount doubled. But GM is forbidden from using any of its $50b US bailout money to rescue its foreign division, and where else is The General going to find the cash to hold off its Korean creditors? Fritz’s statement has the vague confidence of someone deciding which leg to cut off to stay alive.

And even if GM does come up with enough money to pull off an equity offering, it has no way of stopping KDB-initiated reforms in Daewoo management. The bank has said it wants a more prominent role in managing the firm, including hiring its own financial officer. The KDB also wants GM to share licenses for jointly-developed vehicles. And even if GM comes up with some money for the share offering, the KDB is likely to expand its share beyond its current 28 percent. In other words, the bank is going to get its way. Daewoo is slip-sliding away, and all of GM’s small car eggs are still in that basket.

Edward Niedermeyer
Edward Niedermeyer

More by Edward Niedermeyer

Comments
Join the conversation
2 of 16 comments
  • Monty Monty on Oct 15, 2009

    Great writing, Mr. Niedermeyer. I had to double-check the byline to verify the author of this post. You're just as snarky as Mr. Farago; for illustration look no futher than these two gems: "On the point of this contribution however, Fritz was… incoherent." "Fritz’s statement has the vague confidence of someone deciding which leg to cut off to stay alive."

  • Pacificpom2 Pacificpom2 on Oct 15, 2009

    With Holden building the Cruze next year, perhaps this will be the "world car platform" that Zeta/J-car failed to be. GM won't need a manufacturer in Korea anymore, just a design house hooked into the web.

  • SCE to AUX 08 Rabbit (college car, 128k miles): Everything is expensive and difficult to repair. Bought it several years ago as a favor to a friend leaving the country. I outsourced the clutch ($1200), but I did all other work. Ignition switch, all calipers, pads, rotors, A/C compressor, blower fan, cooling fan, plugs and coils, belts and tensioners, 3 flat tires (nails), and on and on.19 Ioniq EV (66k miles): 12V battery, wipers, 1 set of tires, cabin air filter, new pads and rotors at 15k miles since the factory ones wore funny, 1 qt of reduction gear oil. Insurance is cheap. It costs me nearly nothing to drive it.22 Santa Fe (22k miles): Nothing yet, except oil changes. I dread having to buy tires.
  • AZFelix 2015 Sonata Limited72k when purchased, 176k miles currentlyI perform all maintenance and repairs except for alignment, tire mounting, tire patching, and glass work (tint and passenger left due to rock hit). Most parts purchased through rockauto.com.Maintenance and repairs during three years of ownership:Front rotors and all brake pads upgraded shortly after purchase.Preparing for 17th oil change (full synthetic plus filter c.$50), one PCV valve.Timing & accessory belts, belt tensioner.Coolant full flush and change.Fibrous plastic material engine under tray replaced by aftermarket solid plastic piece $110.One set of tires (c.$500 +installation) plus two replacements and a number of patches due to nails, etc. Second set coming soon.Hood struts $30.Front struts, rear shocks, plus sway bar links, front ball joints, tie rod ends, right CV axle (large rock on freeway damaged it and I took the opportunity to redo the rest of items on this list).Battery c.$260.Two sets of spark plugs @ $50/set.Three sets of cabin and engine filters.Valve cover gasket (next week).Averages out to c.$1400 per year for the past three years. Minor driver seat bolster wear, front rock chips, and assorted dents & dings but otherwise looks and drives very well.
  • 3-On-The-Tree 2014 Ford F150 Ecoboost 3.5L. By 80,000mi I had to have the rear main oil seal replaced twice. Driver side turbo leaking had to have all hoses replaced. Passenger side turbo had to be completely replaced. Engine timing chain front cover leak had to be replaced. Transmission front pump leak had to be removed and replaced. Ford renewed my faith in Extended warranty’s because luckily I had one and used it to the fullest. Sold that truck on caravan and got me a 2021 Tundra Crewmax 4x4. Not a fan of turbos and I will never own a Ford again much less cars with turbos to include newer Toyotas. And I’m a Toyota guy.
  • Duke Woolworth Weight 4800# as I recall.
  • Kwik_Shift_Pro4X '19 Nissan Frontier @78000 miles has been oil changes ( eng/ diffs/ tranny/ transfer). Still on original brakes and second set of tires.
Next