Daewoo Motor teeters on edge of bankruptcy

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The Independent Online

Daewoo Motor teetered on the brink of bankruptcy yesterday as creditors gave unions until early today to agree to job cuts needed to secure rescue funds from banks.

Daewoo Motor teetered on the brink of bankruptcy yesterday as creditors gave unions until early today to agree to job cuts needed to secure rescue funds from banks.

South Korea's third-largest car maker failed to pay 87.5bn won (£55m) in debts that matured on Monday and yesterday, but Uhm Rak-yong, president of Korea Development Bank(KDB), said the company would be given until this morning before the banks would consider it insolvent. "Unions just have to deliver to us their agreement on the restructuring plan," he said. "Then we, as main creditor, will persuade other creditors to help Daewoo Motor."

KDB last week rejected Daewoo's plea for $700m (£500m) in rescue funds, citing a company promise - which lacked union support - to cut 3,500 jobs.

KDB and other creditors are in talks to sell Daewoo Motor and related firms to General Motors and Fiat. Daewoo has faced an uncertain future since an expected sale to Ford of the US collapsed in September.

Mr Uhm said that as of yesterday creditors had pumped two trillion won in loans into Daewoo Motor since banks stepped in to rescue the firm in August 1999 and placed it and 11 other units of the Daewoo Group on a massive debt rescheduling programme. Their total exposure to unlisted Daewoo Motor stood at 12 trillion won, Mr Uhm said.

"We will... do our best to avoid a catastrophe," he said, indicating talks with labour officials would go on into the night.

The union issued a statement vowing "emergency" measures if the banks force Daewoo Motor into bankruptcy.

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