Loan guarantee fund sets sail to help auto parts makers

SEOUL, April 23 (Yonhap) -- A local government in collaboration with several
major banks created a 240 billion won (US$177 million) loan payment guarantee
fund on Thursday to help auto parts suppliers hit hard by the global economic
crisis.
The loan guarantee scheme will be used to help secure fresh loans for parts
suppliers of GM Daewoo Auto & Technology Co. and Ssangyong Motor Co. which have
been struggling to cope with a sharp drop in sales, the Ministry of Knowledge
Economy said.
Ssangyong, a unit of China's Shanghai Automotive Industry Corp. is under court
receivership, while GM Daewoo is faced with weak demand and uncertainties
surrounding its parent company General Motors Corp. Both companies have taken
steps to cut back on production to deal with rising inventory that is hurting
parts and components makers.
The ministry, which arranged the deal with the Financial Services Commission,
said Incheon City and Gyeonggi Province agreed to inject 5 billion won each, with
the state-run Industrial Bank of Korea, National Agricultural Cooperative
Federation and Shinhan Bank to come up with 10 billion won to help regional
companies overcome the current liquidity crunch.
Most parts suppliers for Ssangyong and GM Daewoo are located in the Incheon and
Gyeonggi regions.
"The guarantee arrangement will be used to secure loans for parts vendors with
Ssangyong and GM Daewoo to designate those that need help the most," a government
official said.
He added that the fund will provide 100 percent coverage of all loans with
companies to receive low interest rate benefits.
The new regional support fund follows a similar arrangement between Hyundai Motor
Co., steelmaker POSCO, chipmaker Hynix Semiconductor Inc. and three banks that
set aside 42 billion won to provide loan guarantees totaling 700 billion won in
January. Another deal ironed out in November helped inject 100 billion won to
parts suppliers for Hyundai and Kia Motors Corp.
The ministry, in charge of the country's industrial policies, meanwhile, said
that it is pushing forward similar support measures to help other companies.
yonngong@yna.co.kr
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