Daewoo stops production at Surajpur
RBI probe into 20 co-op banks
Bar on brokers

New Delhi, May 4: 
Daewoo Motors India Limited (DMIL) has temporarily stopped production of all cars at its Surajpur factory. The troubled automaker halted production of Nexia and Cielo a month ago; last Monday, it stopped producing its small car—the Matiz.

“We have an inventory of 1,000 Matiz cars at the moment. That is enough to take care of the current market demand for the car. So, we have halted production this month. We have the car kits for three months of production. As soon as the car inventories go down, we will resume production,” company sources said.

“We had been producing the Nexia and the Cielo only against orders. But we stopped production of these cars from the middle of last month because there was very little demand for them,” sources said.

The decision to stop production totally adds a fresh twist to recent developments at home after a truncated GM-Daewoo deal went through last week in South Korea that left out a number of Daewoo assets across the world, including India.

Recent media reports say the financial institutions and banks in India, who had extended fresh working capital loans to the troubled carmaker only a month ago, were uneasy about the safety of their credit and had decided to call in their loans.

Daewoo India officials denied that the banks had called in the loans or that they had threatened to go to court to recover their dues which on current reckoning run up to over Rs 900 crore.

However, they refused to make an official statement rebutting the media reports, saying that they were waiting for signals from South Korea.

“We are waiting for directions from Korea. So far, nothing is fixed about DMIL. So, if the proposed takeover (by GM) does not materialise and we get orders to wind up, the Indian FIs will have first charge on Daewoo India assets,” sources said.

Daewoo Motor India has been through a roller-coaster over the past year; the first signs of trouble surfaced last April when it stopped reporting its sales and production figures to the Society for Indian Automobile Manufacturers (SIAM). By August, trouble broke out at its South Korean parent Daewoo Motor Corp where the creditors decided to press for their money.

Last December, GM signed a tentative agreement to take over a large chunk of Daewoo assets all over the world for a little over $ 600 million, but then had misgivings on the deal. Under a renegotiated deal last week, it took over only three Daewoo plants worldwide—two in Korea and one in Vietnam—and nine marketing franchisees for about $ 259 million.

Although the Indian operations were never considered as part of the negotiations, there was strong talk that it could be taken over in the second phase of the takeover which GM had talked about.

Currently, the shares in Daewoo Motors India are being transferred from Daewoo Corporation, which holds an overwhelming 91 per cent, to Daewoo Motors Korea.

“GM has already committed to supply spare parts and kits for three years. Moreover, whatever happens to DMIL, the production of Matiz will continue even if the company folds up—under some name or the other. In fact, a team from Toyota did come to look at our engine and transmission plant. So, somebody or the other will definitely show interest,” sources said. However, Toyota sources denied that they had visited the plant.

DMIL appears to be clutching at straws to ensure its survival: Daewoo officials had claimed in February that a team from GM had carried out a due diligence exercise to evaluate the plant. This was denied by the GM India officials. Now there’s the bogey over the Toyota interest in the plant, which has also been denied. Meanwhile, DMIL officials have been talking of the possibility of launching the Kalos—a 5-door hatchback that is a fusion of an MPV and small car design—which was launched on May 2 in Korea.

Initial indications were that the Kalos—which means beautiful in Greek—would be built on a GM-Daewoo platform, which meant that it would be built at one of the Korean plants being taken over by GM.

However, the Kalos is being built at Daewoo’s largest plant at Pupyong in Korea which has been left out of the deal. GM has taken a six-year rain check on the Pupyong plant saying it would revisit the option of its takeover along with other Daewoo plants once it had the opportunity to consolidate the Daewoo plants it was acquiring.

“Kalos is a product solely manufactured by Daewoo Korea and it has been launched in Pupyong that was not taken over by GM, signifying that it will remain a product from Daewoo Korea. So, even it comes to India, it will not imply that GM is interested in India. At the most it might indicate that the Indian operations will continue,” said the spokesperson.

However, the DMIL spokesperson said the company will continue to trim its losses and streamline production to remain attractive to suitors like GM when they come calling. It aims to axe 450 workers from its 1500-strong workforce at its Surajpur plant.

The Indian plant has the capacity manufacture 72,000 units annually. This will be second phase of cost cutting in this line, the first being when 237 people were shown the door last October. The closure of Daewoo’s engine and transmission plant triggered the job cuts the last time round.


Calcutta, May 4: 
The Reserve Bank of India (RBI) has identified 20-odd urban co-operative banks as having flouted norms in gilt trading. “RBI is still investigating these banks but that they had violated the norms on trading in government securities is evident from the information we have so far gathered,” a RBI spokesperson said.

While refusing to name the banks that have been found guilty, she said: “What we can say as of now, the loss suffered by these banks is nowhere close to that of Nagpur District Central Co-operative Bank, but that does not mean that they are going to be let off.”

The Nagpur District Central Co-operative Bank lost Rs 150 crore in dubious transactions in government securities. Sunil Kedar, chairman of the bank, was arrested on Friday. The scam has triggered a spate of investigations in the co-operative banks in the state. The Maharashtra government has ordered scrutiny of the accounts of the 658 urban co-operative banks and the 30 rural banks in the state.

RBI’s investigations indicate a strong possibility of the bank’s management having acted in collusion with market intermediaries involved in the deals. Four brokers are alleged to have not delivered the securities bought by the bank. The Maharashtra CID is hunting down the indicted brokers, some of them rumoured to be hiding in Calcutta.

The RBI spokesperson indicated that the management of some of the 20-odd banks found guilty might be asked to step down. “It’s early days yet. We are still investigating the banks, and only after we have examined the nature of the offences, we can say which of these banks would have their management removed,” she said.

Contrary to RBI’s claims, BJP MP Kirit Somaiya, who is also the president of the Investors’ Grievances Forum, has claimed that about 17 co-operative banks in Maharashtra and eight in Gujarat have lost close to Rs 400 crore in dubious deals in government securities. The BJP MP has filed official complaints with the Maharashtra police and RBI against these 25 banks.

RBI says the market’s integrity is not threatened by the recent developments. “The deals affected were settled in physical mode, which constitute only 1 per cent of total transactions,” she said.


Mumbai, May 4: 
Concerned over certain transactions entered by urban cooperative banks (UCBs) in government securities and the dubious role played by some broking entities, the Reserve Bank of India (RBI) has said that banks should not give authorisation to brokers to deal on their behalf in the money and securities markets.

These instructions form part of a circular issued by the apex bank and it comes in the wake of dubious role played by few broking outfits in the government securities market.

Pointing out to a recent scrutiny of investment transactions of some of the UCBs which revealed that “some banks had not observed guidelines” and had undertaken transactions which might have exposed them to significant risks, the RBI sought to clearly demarcate the role of brokers when it said that if a deal is put through with the help of a broker, the latter’s role should be restricted only to that of bringing the two parties of the deal together.

“Under no circumstances, bank should give power of attorney or any other authorisation to brokers/intermediaries to deal on their behalf in the money and securities markets,” the RBI said. It added that UCBs should not undertake any purchase/sale transactions with broking firms or other intermediaries on principal to principal basis and the banks should seek a Scheduled Commercial Bank (SCB), a Primary Dealer or a Financial Institution as a counter-party for their transactions.

While preference should be for direct deals with such counter parties, it will be desirable to check prices from the banks or PDs with whom UCBs may be maintaining constituent SGL Account (CSGL), the central bank said.

According to the RBI, in the event of a deal being put through with the help of broker, the role of the broker should be restricted to that of bringing the two parties to the deal together. Further, it clarified that only brokers registered with NSE or BSE or OTCEI should be utilised for acting as intermediary.


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