(2nd LD) GM bankruptcy won't affect GM Daewoo: Grimaldi

(ATTN: UPDATES throughout with new quotes, details; AMENDS headline; TRIMS throughout)
By Kim Deok-hyun
SEOUL, June 2 (Yonhap) -- The South Korean unit of beleaguered General Motors
Corp. said Tuesday business would continue as normal despite the U.S. parent's
bankruptcy filing.
GM Daewoo Auto & Technology Co. Chief Executive Officer Michael Grimaldi
indicated, however, the cash-starved carmaker needed to secure emergency funding
from South Korea's state-run Korea Development Bank (KDB) within the next three
months to avoid a possible liquidity crunch.
"GM Daewoo continues to operate as normal," Grimaldi told reporters in Seoul a
day after GM filed for Chapter 11 bankruptcy protection in New York. "And I do
emphasize there is no change in the way we conduct our businesses."
"We will continue our discussion with KDB to secure necessary funding
requirements," Grimaldi said, adding financial aid by KDB is "critical for us to
secure a long-term credit facility and we look forward to concluding this
discussion within the next 60 to 90 days."
Since early this year, GM Daewoo and KDB have been in talks over the carmaker's
repeated call for 1 trillion won (US$812.3 million) in emergency loans.
KDB is the main creditor and the second-largest shareholder of GM Daewoo with a
28-percent stake. GM and its partners own the remaining shares in GM Daewoo.
KDB officials have said they may offer financial aid to the South Korean unit if
GM offers part of its GM Daewoo stake as collateral and gives a "clear assurance"
on the future of the local carmaker.
But, Grimaldi said, "GM doesn't have any plan to sell GM Daewoo."
Earlier in the day, GM Daewoo announced that it will become part of a leaner,
smaller New GM and that its activities, including development of GM's global mini
and small car programs, will continue as planned.
Grimaldi said the announcement to include GM Daewoo as part of the New GM
"addressed the questions" raised by KDB and the South Korean government,
describing talks with KDB as "very constructive."
Under the reorganization plan, the once-mighty American auto giant that dominated
the global auto industry for much of the 20th century will be split into the New
GM, which will hold viable assets, and a so-called Old GM, which would acquire
bad assets or liabilities.
GM hopes to emerge from bankruptcy protection within 60 to 90 days by shutting
down factories and slashing its workforce and dealers.
GM Daewoo was created in 2002 after GM and its partners purchased a majority
stake in the auto unit of then bankrupt South Korean conglomerate Daewoo Group,
which collapsed in 1998 under mountains of debt.
Since then, GM Daewoo emerged from its own hard times and was once touted as one
of few profitable overseas units of GM.
But the U.S. parent's troubles and the global economic slump again forced GM
Daewoo to fall into dire financial straits.
Grimaldi said GM Daewoo's cash position became "critical" in the current quarter
as it already exhausted a $2 billion credit line. Last year, the company posted a
net loss of 875.7 billion won, hit by massive losses from currency-hedging
contracts.
The currency-related losses prompted the labor union of GM Daewoo to speculate
that the South Korean unit may transfer money to help its cash-strapped U.S.
parent.
In the first five months of this year, GM Daewoo's sales plunged 45.4 percent
from the same period last year to 222,802 units.
Separately, South Korea's Vice Knowledge Economy Minister Rim Che-min, who
oversees the auto industry, said the government will take steps to help local
auto-parts makers if their businesses are affected by the GM bankruptcy.
GM Daewoo, which employs about 19,000 workers, has more than 800 suppliers with a
combined workforce numbering in the tens of thousands, according to Rim.
(END)