GM Reportedly in Talks With Daewoo
General Motors Corp. and Daewoo Group could next week announce plans for GM to buy part of the South Korean company’s car-making operations, industry sources said Friday.
A memorandum of understanding between the two auto makers could be reached within the next week, but the companies are not expected to announce a specific transaction or investment.
“It’s not going to be a situation where [GM Chairman and Chief Executive] Jack Smith says, ‘I’m signing this document and handing over billions of dollars,’ ” one source said.
GM has been involved in talks with Daewoo and other South Korean auto makers and parts firms for several weeks in an effort to explore opportunities for low-cost production and access to the Korean car market, which U.S. companies view as largely closed.
Wall Street analysts said that Smith, in a conference call, alluded to a possible deal in Korea and said that the devaluation of the South Korean won gave the country an extremely low-cost production base.
Although GM has $17.5 billion in cash and is in a strong financial position to make acquisitions or equity investments in companies, Lehman Bros. analyst Joseph Phillippi said GM won’t want to take on massive debt.
GM sells only about 600 cars a year in Korea, which is Asia’s second-largest auto market after Japan, with annual sales of about 1.65 million cars and trucks. GM and other U.S. auto makers have long complained about South Korean auto makers’ strategy to grow through exports while keeping their home market largely closed to imports.
GM shares fell $2.19 to close at $57.94 on the New York Stock Exchange.