SEOUL - The hunt is on for a new leader of Daewoo Motor Co. Ltd.
In resigning last week, Kim Woo-Choong, South Korea's consummate deal maker, assumed full responsibility for the $72 billion debt that brought down his Daewoo Group. Twelve other key Daewoo executives resigned along with Kim, including Kim Tae-Gou, president and CEO of Daewoo Motor.
Creditors have not yet announced successors to Kim Woo-Choong, Daewoo's founder and chairman, and his lieutenants. But candidates in the running include former Hyundai Motor Co. Chairman Chung Se-Yung. He has volunteered to come out of retirement to head Daewoo Motor.
The arrival of a new bank-appointed management team is not expected to accelerate the negotiations between General Motors and Daewoo Motor over a possible partnership. The resignations 'were a part of a workout plan announced in August,' said Jay Lee, a spokesman for GM Korea. 'It was expected and doesn't affect our position at all.'
The GM-Daewoo talks have been bogged down mainly over the issue of management rights and difficulties in assessing the financial state of Daewoo Motor. The company has complex intragroup dealings and extensive overseas holdings. Chairman Kim was eager for a GM capital injection but was reluctant to surrender management control.
SIGH OF RELIEF
The Korean financial market and investors remain jittery about the ongoing restructuring program at Daewoo, Korea's second-largest conglomerate. But they breathed a collective sigh of relief on the day Kim's resignation was announced. The composite index on the Korean Stock Exchange shot up by more than 5 percent initially; the rally continued all week.
'The worst part of the crisis has passed, so it doesn't pose a threat any longer. We know the scope of the problem and can address the issue,' said Bill Hunsaker, head of research for ING Baring.
Kim and his cohorts were seen as obstacles to the sell-off of assets and the normalization of operations. He had been under increasing pressure to step aside and accept responsibility for the group's downfall.
Daewoo has more than 200 foreign creditor banks and a far-flung empire that includes auto plants in Uzbekistan, Poland, Romania and India. Its complexity is another major factor delaying an agreement. Creditors must weave their way through a financial maze that includes $50 billion in debt and extensive cross-holdings and intragroup dealings. Daewoo Motor's assets are estimated at around $4 billion, while debts are around $8 billion. The final amounts have not been tallied yet.
Under the recently announced program, creditors will convert $1.3 billion of Daewoo Motor's bank liabilities into equity, while the balance of $6.7 billion will be converted into convertible bonds. Bankers will emerge as the majority owners of the carmaker and likely will put Daewoo Motor on the international auction block - much as Kia Motors Corp. was a year ago - if a final takeover deal cannot be struck with GM. Kia is now part of Hyundai.
Since the onset of the cash crunch earlier this year, spending at Daewoo Motor has been slashed, forcing export and domestic marketing teams to operate on shoestring budgets. But creditors now have decided to inject additional credits of $2.35 billion.