GM, Fiat in Talks to Buy Daewoo

S E O U L, South Korea, Oct. 9 -- General Motors and Fiat SpA arediscussing buying assets of ailing Daewoo Motor, South Korea’ssecond-largest automaker.

Today’s announcement gave a boost to the Seoul government’seconomic reform program, which suffered a setback last month whenFord Motor pulled out of a deal to acquire Daewoo. Without elaborating, Ford said it was unable to submit an official bid.

Negotiations BeginIn a joint statement issued with South Korean creditors, GM andFiat confirmed that they have reached an agreement to beginnegotiations on the acquisition of passenger vehicle assets andrelated businesses of Daewoo.

“GM and Fiat will conduct a preliminary due diligence. Thisfirst phase is expected to proceed rapidly and upon furtheragreement will be followed by formal negotiations,” the statementsaid.

Daewoo’s main creditor, the state-run Korea Development Bank,said the process will begin this week and end in two to four weeks.

“I don’t think much time would be needed to come to aconclusion on the Daewoo issue, and also I don’t think there wouldbe a situation similar to that involving Ford,” said LeeKeun-young, head of the state Financial Supervisory Commission.

In June, Ford had been chosen over two consortia — GM-Fiat andDaimlerChrylser-Hyundai — as the sole negotiator to take overDaewoo.

Sale Proceeds Will Go to RestructuringThe government of President Kim Dae-jung had planned to use themoney from the sale of Daewoo to restructure South Korea’sinefficient financial industry.

Daewoo Motor, a key subsidiary of the bankrupt Daewoo group,South Korea’s fifth-largest conglomerate, is in deep financialtrouble with $80 billion in bank debts.

Daewoo’s woes strained South Korea’s banks and other financialinstitutions, which were teetering under mounds of unrecoverableloans.

GM’s interest in Daewoo has brightened South Korean hopes forrebuilding global confidence in the country’s economic future. ButSouth Korean creditors are at a disadvantage in the negotiationsbecause all other potential buyers had backed out.