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Record: 1 WHO'LL TOW DAEWOO? By: Ihlwan, Moon. BusinessWeek, 10/02/2000, Issue 3701, p66-67, 2p, 2 Color Photographs, 1 Chart, 1 Graph Database: SOUTH KOREA Business Source Complete Section: International Business
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too cheap. But they might be grateful for a GM offer again. "Certainly, GM will be offering less [than Ford's $6.9 billion] now," says Seoul National University economist Min Sang Kee. RISK FACTORS. The probable price tag leaves the Kim administration facing a thorny dilemma. On the one hand, selling the embattled carmaker to GM at a bargain price would send a clear message to other chaebol that they may wind up selling their assets cheap unless they fix themselves soon. On the other hand, Kim would certainly be attacked for selling Daewoo for a song just when the government must spend billions more in taxpayer money rescuing the banking sector. And it is largely Daewoo's nonperforming loans that are sapping the viability of the banks. No wonder some industry officials are even suggesting that Daewoo Motor's dozen factories around the world be broken up for sale so as to fetch a higher price. Whichever course Kim takes, he must act quickly. Delaying the sale will not only increase the burden on creditors who spend a combined $130 million a month keeping Daewoo Motor alive but diminish the auto maker's value. As it is, Daewoo, which makes sedans as well as sport-utility and commercial vehicles, has been losing customers. Domestic market share dropped from 28% in the first half of 1999 to 23% in the same period this year. The company reported a net loss of $834 million in the first half, almost double the loss of a year before. Selling formerly treasured assets through a fire sale remains politically risky. But Daewoo's debts must be cleaned up. Otherwise the banks will remain buried under the bad loans to Daewoo and other chaebol and do little new lending to the sound companies that need capital. Come next year, when politicians begin preparing for Korea's 2002 presidential elections, neither voters nor elected officials will have the stomach for bold steps. The Daewoo mess needs a solution fast. THE DAEWOO DEBT OVERHANG DAEWOO'S BANK DEBT NONBANK DEBT TOTAL FINANCIAL SYSTEM DEBT
GRAPH: KOREAN BANKS' EXPOSURE TO DAEWOO MOTOR PHOTO (COLOR): OVERSEAS PLANT: Selling the factories separately might fetch a higher price PHOTO (COLOR): UNDER THE GUN: Oh is aiming to announce a purchaser within a month ~~~~~~~~ By Moon Ihlwan, Seoul Copyright of BusinessWeek is the property of Bloomberg, L.P. and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use.
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