LOS ANGELES - Three weeks after laying off 65 percent of its employees, including its entire field staff, cash-starved Daewoo Motor America Inc. has bitten the bullet and filed for Chapter 11 bankruptcy protection.
Daewoo Motor America officials said the filing took place Thursday, May 16, at U.S. Bankruptcy Court here. Court documents were not available late Friday.
The company's cash flow came to a halt some two months ago when dealers stopped ordering cars amid indications that General Motors would not acquire the U.S. sales arm as part of a deal to take over key assets of Daewoo Motor Co.
That was confirmed in the final agreement announced this month.
Don Betz, Daewoo general manager of dealer development, said the bankruptcy filing would ensure that Daewoo customers - who total about 160,000 - are taken care of until a new company formed by GM and Daewoo Motor Co. handles warranty costs.
"One thing this does is make sure customers will have parts availability and warranty coverage," Betz said.
Although in debt, Daewoo Motor America has paid its dealers warranty claims, Betz said. But it has not been able to pay them other dues, such as those for co-op advertising and rebates.
Meanwhile, more than 350 Daewoo dealers have joined to file complaints in Florida and Texas contending that GM is infringing on state laws by taking over assets of Daewoo Motor Co. without honoring franchise agreements with its U.S. dealers.
Separately, 13 dealers in Texas have asked the state's motor vehicle board to block GM's takeover of Daewoo Motor Co.'s assets. An administrative law judge will hold hearings on the request on June 1.
GM denies any wrongdoing and points out that it never had a relationship with Daewoo Motor America.