GM to take larger stake in Daewoo

words - Ken Gratton
Holden conspicuous by its absence in the closer relations between GM and GM-DAT

General Motors now owns just over 70 per cent of GM-DAT (GM Daewoo Auto & Technology Co). The multinational giant officially increased its shareholding in the South Korean manufacturer last week, following an equity rights issue approved by GM Daewoo's board of directors back in August.

Of the existing shareholders with an interest in GM-DAT, GM was the only company to take part in the issuance. The other shareholders, Korean Development Bank ('KDB'), Shanghai Automotive Industry Corporation and Suzuki Motor Corporation elected not to subscribe.

GM's increased share in GM Daewoo provides additional capital of 491.2 billion Won -- money which will cover "general corporate purposes", according to a press release from GM. Those purposes will include repayment of maturing debt.

It's good news for GM, which is heavily reliant on its South Korean subsidiary for the manufacture and supply of small-to-medium front-wheel drive passenger cars and the Captiva SUV around the globe. In GM's current situation, GM-DAT can pull up some of the slack left by the still pending sale of Opel. And the Korean company being based in a relatively low-labour cost nation like South Korea will help too.

The question remains, however, what happened to Holden's involvement? When GM-DAT was established near the end of 2002, GM's shareholding in the newly acquired company was reportedly overseen by Holden and the Australian subsidiary held a seat on the board of GM-DAT.

In a press release issued by Holden and dating back to October 25, 2002, the following statement appeared: "Holden also announced it would become the GM shareholder in GM Daewoo Auto & Technology Company (GM Daewoo), the global company created to acquire key assets from Daewoo Motor Company. The US$251 million investment means Holden will hold 42.1 per cent of GM Daewoo common shares."

As recently as June of this year, Holden's erstwhile MD, Mark Reuss, said: "We do hold some of the debt for GM Daewoo" and "I'm not going to get into how much, but it's around 50 per cent".

Given GM in the US can barely wipe its nose without asking consent from the US government, from whence came the funds to increase the shareholding in GM Daewoo? Not Holden, we're told by local PR Manager for Holden, Scott Whiffin. In fact, it appears that Holden's financial tie-up with GM Daewoo -- mentioned by the company's boss less than five months ago -- is taking on all the status of modern myth.

"Holden has no representation on the GM-DAT board," Whiffin told the Carsales Network last week.

"In the wake of the latest equity rights issue, GM's shareholding has increased to 70.1 per cent (other shareholders are KDB 17 per cent, Suzuki 6.8 per cent and SAIC 6 per cent). However, Holden does not own that company and owns no shares in GM-DAT."

It would seem that Holden's former GM Daewoo liability has been transferred elsewhere. If it's to another subsidiary, such as GM China, for example, it would clear a massive liability off Holden's books. It would also inject capital at a time when the local manufacturer must try to retain as many staff -- particularly production staff -- as it can, during the lead-in to local production of the Cruze small car.

An internal transfer from one offshore subsidiary (offshore from the US) to another would leave the US government out of it and could be achieved quickly, with none of the need for due diligence and other accounting/legal procedures normally conducted in a transfer from one company to another.

When asked how the acquisition was funded, Whiffin advised he was not in a position to answer, saying "this is a GM corporate issue".

A question concerning the existence of any obstacles to the transaction, in light of the corporation's Chapter 11 obligations was met with much the same answer.

Seems like Sergeant Schulz is alive and well -- and working in corporate accounts at Fishermans Bend.


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Published : Monday, 2 November 2009
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