Daewoo Motor Suppliers Suspend Parts Deliveries – Brief Article
South Korea’s Daewoo Motor Co., suspended production on August 28th as a major supplier owed part of $700 million in unpaid bills stopped deliveries of brakes and other parts. Daewoo estimated that lost output stemming from a continued boycott by suppliers would amount to 15 billion won ($12.5 million) a day, or around 2,000 automobiles.
The supply problem is the latest headache for the debt-laden automaker ahead of the launch of a revived Daewoo Motor under a joint venture with General Motors later this year. Daewoo said its biggest single supplier, Korea Delphi Automotive Systems, was one of the companies that halted supplies. Korea Delphi is a joint venture between U.S. auto parts maker Delphi Corp. and former Daewoo units.
The suppliers are seeking a total of around 850 billion won ($708.3 million) in back payments. Daewoo said its parts suppliers also suspended supply last December, but that lasted less than a day after the automaker sought their cooperation.
An official at Daewoo’s main lender, Korea Development Bank (KDB), was unable to confirm a report in the Korea Economic Daily that the state-run bank planned to offer as much as 100 billion won to the automaker’s parts suppliers. The KDB official said such a decision was still under discussion. Daewoo has said it needed creditors’ approval to make payments owed to the parts suppliers, while the lenders were still in discussions over how much debt they should shoulder.
In April, GM agreed to invest $251 million and take a majority 42.1 percent stake in a joint venture with Daewoo’s creditors, while GM’s business partners hold 24.9 percent. GM has agreed to take on up to $250 million in Daewoo’s debt, which could cover payments to parts suppliers after the launch of the joint venture.
As of Monday, September 2, Talks aimed at ending a supply boycott at Daewoo Motor made little progress, a Daewoo Motor spokesman said. “Creditors and parts suppliers are still talking on and off on an unofficial basis. But there are no signs yet of narrowing opinions,” said Daewoo spokesman Kim Sung-soo.
They will meet again on September 4 to discuss a new offer from creditors. But a joint venture with General Motors to revive Daewoo Motor will be launched in September as scheduled despite the boycott, GM officials said.
Creditors of Daewoo have recently extended the payment period to suppliers to four to five weeks from two weeks of deliveries. They also offered to shorten the payment period back to two weeks, with an additional offer of fresh loans.
The $700 million in unpaid bills is the main problem that needs to be resolved. Suppliers want full payment, while creditors, who have spent over $2 billion to keep Daewoo afloat since 1999, want the suppliers to share the burden by halving their claims.
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