General Motors is to build a new Asian auto group around the remnants of bankrupt South Korean car firm Daewoo after the two parties agreed a $2 billion (€2.2bn; £1.4bn) deal.
The world’s number one auto maker will take a 42.1% stake valued at $251 million in a yet-to-be-named car company based in Korea. Daewoo’s creditors will buy a 33% holding for $197m, while GM partners will pay $149m for the remaining shares.
Under the agreement – which follows nearly eighteen months of negotiations – the new firm will take on $573m of liabilities and gain stocks worth $385m. Its long-term working capital will total $2bn.
To build the new group, GM will acquire two of Daewoo’s four Korean plants plus one in Vietnam, as well as nine of its international sales groups, though not in large markets such as the US and the UK.
“This enterprise,” enthused GM chairman Jack Smith, “will produce a new generation of cost-competitive vehicles that can be marketed around the world.”
In charge will be Nick Reilly, formerly chairman of British unit Vauxhall, who has overseen negotiations with Daewoo, its creditors and labour representatives during the last six months.
GM has lately been on a global expansion drive, having built alliances with Fiat Auto, Suzuki, Isuzu and Fuji Heavy Industries. Its entry into the Korean market follows the purchase by rival DaimlerChrysler of a minority holding in the nation’s biggest auto firm, Hyundai Motor.
Data sourced from: Financial Times; additional content by WARC staff