Daewoo Motor, once a show case of South Koreas industrial
prowess, is on the verge of bankruptcy after failing to honour its debt commitment to the
tune of Won44.5bn or $39 million. Under Korean laws, a company is considered
insolvent after it misses two consecutive days of debt repayments. In the current
situation, the company, which is under a debt-restructuring program, shows little signs of
being able to pay its maturing loans.
The companys trade unions have been
strongly opposed to job cuts that creditors have been demanding to restore the company
back to profitability in two years. As a result of this stand-off, creditors have said
they would not provide new loans to Korea''s number two carmaker.
According to industry
sources, while the bankruptcy could mar efforts to sell the company to automobile giant,
General Motors and its Italian partner Fiat, it might present the creditors with the right
opportunity to break up the company and offer it piecemeal to buyers.