Gov't to act on Daewoo bankruptcy
The declared bankruptcy of South Korea's Daewoo Motor company last week caused confusion in Poland as government ministers tried to play down the problem. They admitted, however, that the company had seriously faltered on its commitments.
The issue was further clouded by a Daewoo statement that Volkswagen had expressed interest in buying the company's vehicle plant in Lublin. In addition, the Polish government said that South Korea's Hyundai was also interested in purchasing the Warsaw car manufacturing plant.
The Korea Development Bank, Daewoo's main creditor, said last Tuesday that the auto maker owed it $10.5 billion. This followed failed negotiations with the company's labor unions to agree on a restructuring plan, which would have meant the redundancy of 3,500 workers in South Korea.
The company's creditors announced the bankruptcy after Daewoo missed two consecutive days worth of payments totaling $150 million, according to a Reuters report. As a result, one of the country's major factories in South Korea suspended its production lines.
Government officials in Poland, the site of Daewoo's largest overseas plants, moved quickly to counter rumors that the company would be closing down or selling off its factories in the country.
Edward Nowak, the deputy economy minister, said there was nothing to worry about. "(South Korean) Trade Minister Duck-soo Han has assured us that he'll do everything to maintain the production in the Polish factories even if the Korean factories fail," he said.
Janusz Wozniak, vice president of Daewoo-FSO, also poured scorn on rumor mongers. Events in Korea "won't influence the functioning of our company," he said, adding that Daewoo-FSO (the company's Polish arm) has a sufficient supply of parts for the production of new cars for the next few months. After this there shouldn't be any problem with the supply of car parts for Polish factories because Korean courts would help ensure payments for the short term, Wozniak said.
"When Daewoo came to Poland it pledged an investment of $1.1 billion in Daewoo-FSO," Nowak said. "So far it has invested $780 million, with another $340 million (to be invested)."
But last week, with no more funds forthcoming, the Polish government announced that it might be willing to guarantee $230 million in loans for the factories in Warsaw and Lublin. A $130 million loan would be granted to the Lublin factory to help launch production of the LD100 van. The other $100 million would be used to start production of engines for the Matiz model in Warsaw, Nowak said. Wozniak said the investment in Warsaw would recoup profit within six to seven years.
Analysts said these investments are essential for Daewoo to maintain employment and continue to develop new production lines in its Polish factories.
But according to Deputy Finance Minister Rafal Zagorny, who recently flew to Seoul with a Polish delegation to talk with the South Korean government, the Polish government is entitled to take over the company's factories if Daewoo does not keep its commitments. "We will add up how much Daewoo owes Poland and lay claim to it," Zagorny was quoted by Reuters as saying in a TV interview. "The only asset with which we can be paid are the factories."
However, Nowak denied Friday that the government was considering this course of action.
But analysts said the government is keen to sell off factories in Poland as independent units. In particular, it's worried that General Motors, which is already negotiating a buyout of Daewoo Motor in Korea, has no strategic interest in the Polish plants.
The government also said it intended to start its own bilateral negotiations with other interested buyers of the Daewoo plant in Lublin.
Late Friday, a press spokeswoman for Daewoo-FSO confirmed rumors that Volkswagen was interested in the vehicle plant in Lublin along with the company's 50% stake in U.K. van manufacturer LDV, according to the Polish Press Agency (PAP).
In addition, Nowak said Hyundai had shown interest in purchasing Daewoo's factories in Poland, especially in Warsaw.
