Holden denies Korean engine production gambit

The Korea Development Bank is reportedly applying pressure for GM-DAT to be a full carline developer -- at the expense of Holden. As the major creditor owed money by GM-DAT (GM-Daewoo), the South Korean bank has told GM that it won't provide further financial aid to the company that supplies Barina, Cruze, Epica and Captiva to Holden unless Holden relinquishes engine production at its Fishermans Bend plant.

According to a report in the Korea Times (more here), the bank (KDB) doesn't see GM-DAT providing an adequate return on investment unless it can produce its own engines -- and the KDB specifically has its eyes on the V6 engine output currently within the purview of Holden's plant in Port Melbourne.

As a quid pro quo, the KDB will allegedly provide the one trillion Won of financial aid the company needs to continue operating in exchange for a new engine production facility operated by GM-DAT.

This afternoon, the Carsales Network spoke to Holden's National Media Manager, Scott Whiffin, who stated outright that production at the local engine plant was not in any way under threat.

"I can say that there's no question mark at all over our engine plant here," he responded. "I would put that down to baseless speculation."

"Any suggestion that the engine plant here might be packed up and shipped offshore is just plain wrong. It's state of the art, it's world-class and it's doing what it's built to do."

While the bank may have a case for GM-DAT to build its own engines, the cost of importing them into Australia for fitment to Commodores (currently around 66,000 units a year, according to Holden MD Mark Reuss) is presumably unacceptable to Holden and GM-DAT would have to take on more debt to establish an engine-building facility -- just to borrow more from its principal financier. That's piling debt on top of debt. The Captiva -- sold in South Korea as the Daewoo Winstorm (pictured) -- is the only volume-selling vehicle built by GM-DAT and powered by V6.

Holden is GM's agent in the GM-DAT venture, with the Australian company understood to hold roughly a 50 per cent stake in the South Korean firm. By acting on behalf of GM, Holden would be the division most closely involved in negotiations with the KDB -- and that's possibly why the KDB is angling for V6 engine production to shift offshore from Australia. It's the necessary leverage for Holden to acquiesce in some other way.

During his presentation to local media today, Holden's MD Mark Reuss confirmed that the local manufacturer is liable for GM-DAT debt. When asked whether the announcement overnight of GM filing for Chapter 11 (more here) would impact on Holden's relationship with GM-DAT and its interest in the South Korean company, Reuss was quite succinct.

"There's no effect on that... on a debt basis" he said. Reuss did not elaborate however, on what Holden and/or GM had planned, in order to rein in GM-DAT's debt or how GM's move to what Reuss called "bridging loan activities" would play out for the South Korean firm. Until very recently, the GM-DAT product sold around the world (as Holdens in Oceania and as Chevrolets elsewhere) have proved quite lucrative -- so GM is probably in no hurry to offload GM-DAT in a fire sale.

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