(EDITORIAL from the Korea Times on Feb. 23)

Carmaker's Distress Call: Decision on GM-Daewoo Is Touchstone of Restructuring

Given the current economic situation, nothing should be unusual with the nation's
third-largest automaker asking its creditors for some ``emergency'' lending.

But the Ministry of Knowledge Economy turned down an earlier request from the
GM-Daewoo Auto and Technology, a local unit of the troubled General Motors Corp.,
judging ??? correctly ??? that it was not time for the government to pour
taxpayer money into salvaging a private company.
Not so easy will be the decision of the Korea Development Bank, a government-run
lender and GM-Daewoo's main creditor, on whether or not it will positively
respond to the carmaker's plea for additional loans of at least one trillion won
($660 million).
To be considered is not only an automaker's survival but also the nation's auto
industry amid the global shakeup hitting this particularly industrial sector; the
government's much-delayed industrial restructuring, particularly involving large
manufacturers; and the nation's trade relationship with the United States, which
thinks ??? incorrectly ??? the balance in auto trade is unfairly in favor of
Korea.
The KDB's principle to base its final decision on GM-Daewoo's self-rescue efforts
and Washington's handling of its parent group, including even the possibility of
leaving GM in the hands of bankruptcy court, appears reasonable for now, in this
regard. It is true that most governments are going to great lengths to bolster
their respective automakers, raising serious concerns of resurgent trade
protectionism, not just because of the industry's status as the symbol of
manufacturing but because of its vital role in saving and creating jobs,
including those at parts suppliers.
Considering industry analysts' conclusion that continuous bailouts in the auto
sector could end up as proverbial throwing water on thirsty soil bringing down
other industries with sufficient growth potential, the most important thing will
be discerning jade from stone ??? firms which have long-term viability and those
that don't.
So it's only natural GM-Daewoo's executives and employees should agree on wage
cuts, more flexible work shifts and other cost-cutting efforts. Fortunately for
the automaker, the company's main strength is its smaller, fuel-efficient models,
a factor that also can help to assure the Korean unit's survival in GM's global
reorganization.
The keyword is an automaker's future strategy backed up by sufficient technology
and R&D, as well as labor-management harmony. Another factor should be the
automakers' contribution to the national economy and consumer welfare. The
government's reported plan to provide subsidies to buyers of new cars is not just
premature but gives an unfair advantage to automakers, in this regard.
For example, Hyundai Motor, the nation's largest and the world's sixth-largest
automaker with affiliate Kia Motors, has yet to introduce a discount system for
buyers who make lump-sum payments, as it did during the Asian financial crisis of
11 years ago, despite hefty cash reserves. Hyundai, which has made a sensation by
introducing marketing tactics to ``buy back'' vehicles from clients losing jobs
after car purchases, has made only gestures of discounts on the home market, with
no substantive changes.
Last but not least is auto trade between Korea and the United States. When
Washington contrasted auto import figures of 775,000 vs. 6,500 in 2007, it didn't
include 125,000 cars GM-Daewoo produced here. The final decision on whether, how
much and when the financial aid should be given will likely belong not with the
government-run bank but the government itself, by taking a number of these
complex factors into consideration.
Policymakers will have to be prudent in judgment but swift in action. Dragging
their feet in vital industrial restructuring like this is better than only one
thing ??? taking no action at all.
sam@yna.co.kr
(END)