SEOUL - Creditors of Daewoo Motor Co. have put the bankrupt Korean automaker back on life support by agreeing to provide an infusion of short-term operating funds.
Last week's move marks a reversal for bankers. They initially had refused to provide additional loans unless Daewoo's labor union agreed in writing to a restructuring plan that called for an 18 percent cut in the company's 19,000-member work force. Union leaders refused, citing a no-layoff agreement signed by management in August. The company's Korean operations were forced to a halt.
But after production shutdowns, the union rank and file voted overwhelmingly in favor of the restructuring plan and agreed to job cuts.
The package is worth 728 billion won, or $603.1 million at current exchange rates.
The cash-starved Korean automaker will immediately receive $74.5 million to pay suppliers, many of whom are on the verge of bankruptcy; to settle back wages to employees; and to meet pension responsibilities. The amount falls slightly short of the $828.5 million company officials have estimated they need each month to keep the company running.
The development brought new hope for a deal between Daewoo and potential buyers General Motors and partner Fiat Auto S.p.A.
A Daewoo spokesman said the company's Kunsan and Changwon plants were back to normal operations last week after short interruptions of production. The Pupyong plant, the first to be hit by the stoppage, will resume output today, Dec. 4, ending a 17-day shutdown.
Total production losses at all three plants are estimated at around 15,000 vehicles.
Despite the agreement and resumption of negotiations with foreign buyers, Daewoo is not out of the woods. Analysts expect deeper cuts, including the possible closure of plants in Korea and abroad as well as the discontinuation of slow-selling models.