GM has 'constructive' dialogue with SKorea bank

BUPYEONG: The chief executive of General Motors said Thursday he held "very constructive" dialogue with a South Korean state bank on fresh support for the US automaker's struggling local unit.

Fritz Henderson met top officials of the Korea Development Bank (KDB), the key creditor of GM Daewoo Auto and Technology, on Wednesday.

GM Daewoo is seeking a one trillion won (855 million dollar) loan after using up a two billion dollar credit line from creditors.

Last week the bank threatened not to roll over loans or provide fresh funds to GM Daewoo unless the US parent agreed to several demands.

"We did have a constructive and open dialogue" with KDB, Henderson told a press conference, declining to give details.

"I would say the discussions were very much focused on how we, collectively as shareholders and with KDB as the principal creditor of GM Daewoo, can make GM Daewoo successful in the future."

KDB has a 28 percent stake in the local carmaker while the US firm holds a 51 percent stake.

GM's executive vice president Nick Reilly said the US firm has no plans to seek bankruptcy protection for GM Daewoo, and both the creditors and the parent firm were trying to find ways to ease its financial crunch.

He confirmed GM Daewoo made large losses on foreign exchange hedging aimed at reducing its vulnerability to currency movements, but gave no figure.

GM Daewoo has also been hit by falling demand amid the global downturn. The US giant emerged from bankruptcy in July under a government-backed rescue plan.

GM Daewoo is also reportedly planning a 491.2 billion won share sale this month to secure working capital. KDB wants the carmaker to increase the size of its share offering and accept other conditions in return for aid.

The state bank's chief Min Euoo-Sung said last week that KDB would not take part in a new share sale and would retrieve maturing currency forwards or loans unless GM accepts its demands.

Min urged the US company to offer part of its stake in the local unit as collateral. He also insisted GM Daewoo should be allowed to retain licences for cars that it develops itself.

GM Daewoo posted a net loss of about 700 million dollars last year. In the first eight months of this year, its sales fell 45 percent from a year earlier to 344,444 units.

Seoul has said banks, not the government, should lead the process of salvaging ailing auto firms, maintaining that direct aid breaches global trade rules.