The Telegraph
Since 1st March, 1999
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Daewoo faces boycott threat from suppliers

New York, Aug. 26: Daewoo Motor is confronting a new threat to production this week just as it appears on the verge of a takeover by General Motors that could again turn it into a major competitor in Korea and much of Asia.

This time the bankrupt company must contend with the threat of a boycott by suppliers demanding payment for parts shipped over the last two years.

The company’s 190 suppliers, contending they are owed more than $ 300 million for parts and components, were scheduled to meet soon to vote on a resolution under which they would halt all shipments over the next few days.

Suppliers said their problems have been mounting since Daewoo Motor was taken over by creditors, led by the state-controlled Korea Development Bank, in mid-1999.

By now, according to a spokesman for the suppliers, 32 of them are already in bankruptcy and another 30 may go bankrupt if Daewoo fails to meet payments by the end of the month.

The spokesman, predicting the suppliers would approve the resolution, said they were all suffering financial problems because of the delays in payment.

The threat of a halt in production by Daewoo Motor presented new problems for GM, which had planned to start a new company, GM-Daewoo Auto and Technology, next month.

The start of GM-Daewoo had already been delayed while creditors decided how to split up more than $ 2 billion that they were obligated to extend to the newly formed company, for which General Motors is paying an initial $ 400 million. The understanding is they would extend credit of $ 1.25 billion at the market rate and another $ 750 million at 6 per cent.

A court this week will begin to reconsider a new plan drafted by creditors. The need for reconsideration of the original plan, which General Motors thought had been completed when the deal was announced in April, means that GM-Daewoo Auto and Technology cannot take over the Daewoo Motor plants included in the agreement and begin producing cars under the new name until October at the earliest.

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