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Credit banks threatens to withhold Daewoo loans

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November 5, 2000 

SEOUL (UNB) - Banks on Saturday threatened to withhold loans to Daewoo Motor Co. - a move that could force the heavily indebted carmaker into bankruptcy - unless the company's labor union agrees to restructuring.

Daewoo Motor, the nation's No. 3 carmaker, must pay dlrs 155 million in debts coming due within a week and the company would go bankrupt without quick new loans from the creditor banks, said Um Nak-yong, president of Korea Development Bank, Daewoo's main creditor.

Daewoo's hardline labor union oppose restructuring demanded by potential foreign investors, including U.S. automaker General Motors Corp. Under such circumstances credit banks can't provide new funds, Um said.

Resistance by hardline labor is seen as a major obstacle to South Korea's efforts to liquidate or sell debt-strapped businesses to restore foreign investors' confidence in the economy.

About 500 workers set fire to seven trucks during a protest rally Friday evening after credit banks said they would liquidate or sell Samsung Motor's truck-making plant and 51 other troubled companies.

"We oppose liquidation," the Samsung workers chanted at their plant in Taegu, central South Korea. Liquidation occurs when a company's account is settled by apportioning assets to creditors.

The car businesses of Daewoo and Samsung have become symbols of South Korea's reckless expansion on borrowed money.

Samsung sold its passenger car operation to Renault SA of France early this year. On Friday, banks said that Samsung's truck-making operation was also nonviable and must be liquidated.

Daewoo is now surviving on emergency funds from credit banks trying to sell the company to a foreign investor. GM is negotiating with Daewoo Motor's credit banks after Ford Motor Co. pulled out of a deal to acquire Daewoo in September.

If Daewoo Motor is declared bankrupt, it would further complicate sell-off negotiations with GM, Um said.

There was no immediate reaction from Daewoo's labor union. But the union has threatened strikes if their company is sold to a foreign investor. They fear such a takeover would result in massive layoffs.

Daewoo has the capacity to make 2 million vehicles a year in plants stretching from the Philippines to Poland. Last year, it lost dlrs 3.9 billion on revenues of dlrs 5 billion.

The nation's umbrella union groups threatened to organize strikes to protest the government's corporate reforms.

On Friday, creditor banks released the list of 52 firms they deemed nonviable and planned to liquidate, sell off or put under court receivership. The 52 were screened out of 287 companies whose future has been in question with huge amounts of debts.