U.S. Unit of Daewoo Files for Bankruptcy Protection

Daewoo Motor America said Thursday that it filed for bankruptcy protection from creditors. Top executives of the Compton-based car importer said the Chapter 11 petition would protect 160,000 Daewoo automobile owners in the U.S.

The plan, filed in federal court in Los Angeles, says a group of South Korean banks and government agencies has agreed to provide sufficient funding for the U.S. firm to continue importing and distributing parts and to reimburse its dealers for doing warranty work on customers’ cars, said Mike Mahoney, Daewoo Motor America’s sales operations manager.

That arrangement would last until July, when a private company controlled by General Motors Corp. would assume responsibility for guaranteeing a flow of parts and funding to the U.S. so Daewoo dealers would be able to continue doing repairs, Mahoney said.

The importer’s parent, South Korean auto maker Daewoo Motor Co., went bankrupt last year, and General Motors recently agreed to acquire certain key assets that would help GM expand its presence in Asia. The deal, which did not include any of Daewoo’s U.S. operations, also would enable GM to sell Daewoo vehicles under a GM brand name in Mexico and, possibly, in the United States.

About 300 of Daewoo’s 525 U.S. dealers have banded together and retained a Florida law firm to sue GM for damages, claiming that the company is killing the Daewoo brand in the U.S. and forcing them out of business to clear the way for it to sell the vehicles through GM dealerships. The suit has not been filed, although administrative claims against GM have been filed on similar grounds in Florida, Texas and Pennsylvania.

GM has denied the allegation and says that it has no legal responsibilities to the Daewoo dealer network in the U.S. The auto maker has said, however, that it will ensure that existing Daewoo warranties are honored.

Gary Connelly, Daewoo Motor America vice president and general manager, said Thursday that about 50 of the company’s 60 remaining employees will be retained to shepherd it through the next two months.

Mahoney said he expects that with no new cars coming into the country, some Daewoo dealers in the U.S. will be forced out of business in coming weeks.

But others, especially those with franchises of other automotive brands to keep them going, will remain open to do repair work now that reimbursement has been guaranteed, he said.