GM Daewoo Seeks Urgent Financing as Sales Plunge and Production Halted

Strategic Insights -

Seoul-based GM Daewoo Auto & Technology Co., the South Korean unit of General Motors Corp., has appealed to the Korea Development Bank (KDB) for hundreds of millions of dollars in aid, citing dire financial straits and a steep drop in sales. The request comes after the South Korean government turned down a similar plea a week ago, and as GM Daewoo halts production at its plants for the third time since December.

Key Takeaways:

  • GM Daewoo, the third-largest carmaker in South Korea, has used nearly all of its $2 billion credit line offered by the KDB as part of a deal in 2002.
  • The company's CEO, Miachel Grimaldi, visited KDB and sought 1 trillion won (approximately $669 million) in financial assistance in exchange for submitting financial records and clarifying GM's stance on its South Korean unit by the end of March.
  • GM's global units have lined up for a total of $6 billion in financial aid from five foreign governments, with GM planning to cut 47,000 jobs and close five more factories as part of its self-rescue plan.
  • GM Daewoo's sales have plummeted, with a 50.5% decline in January and a cumulative 8% drop in 2008, with domestic sales falling 20.4% and exports plummeting 53.6%.
  • The company has halted production at its plants for the third time since December, with its No. 2 plant idling for the majority of working days this month and its No. 1 plant closing for 12 days.

Statistics:

  • GM Daewoo's sales: 881,959 units in 2008, a 8% decline from the previous year.
  • January sales: 45,842 vehicles, a 50.5% plunge from the previous year.
  • Domestic sales: 6,914 units in January, a 20.4% decline.
  • Exports: 38,928 units in January, a 53.6% plunge.
  • Global aid requested by GM: up to $30 billion from the U.S. government.
  • Global aid lined up by GM units: $6 billion from five foreign governments.

Sources:

  • "Appeals for long-term financing by GM Daewoo takes urgent turn, KDB officials say" by Asia Pulse (February 20).
  • "GM to Cut 47,000 Jobs in Bid to Save $30 Billion" by the Wall Street Journal (February 19).
  • "GM Daewoo Faces Crisis After Sales Drop" by Yonhap News Agency (February 20).