11/08 02:24 Daewoo Motor Declared Bankrupt After Union Talks Fail (Update5) By Sangim Han

Seoul, Nov. 8 (Bloomberg) -- Daewoo Motor Co. was declared bankrupt by its creditors after the automaker's union rejected job cuts needed to facilitate its sale to General Motors Corp.

Korea's second-largest automaker may file for a court to administer its assets within two or three days, said Uhm Rak Yong, governor of Korea Development Bank, its leading creditor. While such proceedings could affect talks with General Motors, he said, they may also make the company more transparent.

Daewoo Motor built up 18 trillion won ($16 billion) in debt during an aggressive overseas push that left it with 12 plants scattered from Poland to Uzbekistan. Korean banks provided an extra 2 trillion won to keep the automaker in business since agreeing to a bailout a year ago.

``Daewoo Motor will find it easier to forge ahead with restructuring, get its books more transparent and clean itself up for potential buyers,'' said Keum Dae Ki, who manages 30 billion won in assets at Dongwon Securities Co. in Seoul. ``The court-appointed management owes nothing to the union.''

Union members opposed company demands that the workforce be cut by a third and remaining workers accept pay cuts, Daewoo Motor union spokesman Yu Kwang Soon said. A key hurdle was getting the union to drop terms agreed in August with the company that guaranteed job security for five years.

Alan Perriton, General Motor's executive in charge of partnership development in Asia, said in a statement the company is monitoring the situation closely but doesn't want to comment.

``We are concerned making (Daewoo) go bankrupt could affect talks with General Motors,'' said KDB's Uhm. ``On the other hand, it could help clear up the issue of hidden debts, which would help the sale talks.''

The biggest market reaction came for Daewoo Motor's listed affiliates. Shares of Daewoo Motor Sales, the automaker's domestic retail fell 14.9 percent to 1,345 won. Ssangyong Motor, a Daewoo affiliate, fell 11 percent to 880 won.

The benchmark Kospi index rose 0.9 percent to 558.1 while yields on benchmark three-year corporate bonds rose 41 basis points to 9.16 percent.

``It's regrettable we couldn't get an agreement from the union,'' Daewoo Motor director Kim Jong Do said. ``We will take steps to handle our problems soon,'' he said, without elaborating.

Insolvency could hurt some of Daewoo Motor's suppliers and lead to a chain of bankruptcies, analysts said. Daewoo Motor's suppliers include more than 9,000 companies, which employ as many as 500,000 workers, according to Daewoo Motor.

Those to be affected from Daewoo Motor's bankruptcy will include its main suppliers, such as Dongyang Mechatronics Co., Dongwon Metal Industries Co. and Pyunghwa Industrial Co., said Kim Hag Ju, an auto analyst at Hyundai Securities Co. in Seoul.

With the delayed restructuring of Daewoo Motor, its bigger rival Hyundai Motor Co. could expand its market share in Korea, analysts said.

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-- Carl Jenkins (somewherepress@aol.com), November 08, 2000