P&A Providers & Administrators
MenuMENU
SearchSEARCH

KDB, GM Reach Deal Over Korean Auto Maker

December 8, 2010
3 min to read



SEOUL - Korea Development Bank struck a deal with General Motors Co. to ensure the future of the car maker's South Korean unit, which had been in doubt because of its parent's financial woes in the U.S., reported The Wall Street Journal.


GM was bailed out by the U.S. government last year and made an initial public offering in the U.S. last month. The Detroit-based auto maker owns 70.1% in GM Daewoo Auto & Technology Co. GM took over Daewoo Motor Co. in 2002. GM Daewoo has been a manufacturing base for minivehicles and small vehicles for GM.

Ad Loading...


Government-owned KDB is a creditor as well as the second-biggest shareholder of the Korean auto maker, holding a 17% stake.


Under a previous agreement between KDB and GM Daewoo, the South Korean unit had to seek approval to use GM technology in its vehicles. The requirement bound GM Daewoo's fate tightly to the fortunes of GM. Analysts believed GM Daewoo, one of South Korea's biggest car makers, couldn't survive if GM pulled out of the country.


The new agreement gives GM Daewoo the right to use jointly developed technology without seeking approval. GM Daewoo also will be able to receive royalties from jointly developed technology.


"GM Daewoo is now able to look to opportunities to seek a continued growth through strategic ties with other car makers or [mergers and acquisitions] even if GM sells its stake in GM Daewoo and leaves the country," KDB Vice Chairman and Chief Operating Officer Kim Young-kee said at a news briefing Wednesday.


GM Daewoo on Wednesday also fully repaid 1.126 trillion won ($994.3 million) under a revolving credit facility with KDB. The company expects the settlement will decrease its borrowing costs.

Ad Loading...


"We are open to extend a loan to GM Daewoo under new contract terms, if it wants to borrow money next year," Mr. Kim said.


Under the new agreement, KDB will have veto rights over GM Daewoo's management decisions even if the bank reduces its stake in the car maker. The stake limit for the veto right was lowered to 15% from the previous 25%. The bank will also have an influence over GM Daewoo's management with the power to appoint three outside directors to the company's board.


Under Wednesday's deal, GM guaranteed it will reimburse shareholders a total of 2.3 trillion won of preferred stock in GM Daewoo between 2012 and 2017 if its Korean unit isn't able to do so.


GM Daewoo, which posted net losses in 2008 and 2009, needs to generate 400 billion won to 500 billion won a year in net profit to repay preferred stocks as scheduled, KDB said.


"GM has agreed to set up a long-term plan to help GM Daewoo have a clean bill of health, which will make GM keep a watchful eye on the unit's business developments," Mr. Kim said.

Ad Loading...


GM International Operations President Tim Lee said the new agreement assures the future of GM Daewoo. "We have aggressive business plans for our Korean unit in the domestic market as well as the international arena," he said.


More Industry

Kia Niro SUV in gold color parked outdoors
Industryby Hannah MitchellSeptember 1, 2026

Kia Closes Out Summer With a Bang

Its U.S. subsidiary broke multiple records in August, in part due to a surge of demand for hybrids models.

Read More →
Outside of Auto Park Ford dealership
Industryby Lauren LawrenceSeptember 1, 2026

Indiana Dealership Changes Hands

A 30-year-old Ford dealership in Indiana has a new owner and will soon be undergoing renovations to meet manufacturer requirements.

Read More →
Three men standing in front of two classic cars handing off gift.
Industryby Hannah MitchellAugust 25, 2026

Texas Dealership No Longer in the Family

The Ford store, a longtime cornerstone of the Houston market, is now part of one of the fastest-growing U.S. auto groups.

Read More →
Ad Loading...
Outside of modern car dealership “Genesis of San Bruno
Industryby Lauren LawrenceAugust 25, 2026

Genesis Grows California Presence

The Cardinale Automotive Group opened its third Genesis rooftop in the Golden State, Genesis of San Bruno, a stand-alone dealership serving the San Francisco Bay Area.

Read More →
Red Honda Civic hybrid sedan on two lane road with green hills in background
Industryby Hannah MitchellAugust 21, 2026

August Auto Sales a Mixed Bag

An early forecast shows strong business despite consumer hurdles, and hybrids are a big piece of their affordability coping strategy.

Read More →
EV charger inserted into dark-colored car port
Industryby Hannah MitchellAugust 18, 2026

EV Market Humming Along

July sales show steady growth as the segment stabilizes from last year’s artificial surge following pullback of federal support.

Read More →
Ad Loading...
car in background with hand giving a thumbs up in front
Industryby Lauren LawrenceAugust 14, 2026

Auto Loan Delinquency Rates Stabilize

Auto loans are a main driver of nonmortgage consumer debt, but delinquency rates stabilized in the second quarter across all credit risk tiers.

Read More →
blue sky, yellow and orange rollercoaster with riders going up an incline
Industryby Lauren LawrenceAugust 12, 2026

EV Sales Recover in Q2

The EV sales roller coaster continues as numbers show improvement, but industry experts predict a year-over-year third-quarter decline and fourth-quarter jump.

Read More →
Photo of blue Toyota Prius parked next to body of water with city skyline in background
Industryby Hannah MitchellAugust 5, 2026

The Cheapest Hybrids to Fuel

The powertrain is increasing in popularity, in no small part due to its fuel economy. A new report lists the most efficient hybrids on the market.

Read More →
Ad Loading...
white SUV parked in front of a body of water with a gray sky background
Industryby Lauren LawrenceAugust 5, 2026

Hybrids and SUVs Gaining Ground

The most recent Kelley Blue Book Brand Watch found that only two nonluxury brands increased in shopper consideration, buoyed by their hybrid and SUV offerings.

Read More →