GM offers to buy Daewoo car unit

General Motors Corporation has offered to buy the beleaguered Daewoo Motors India Ltd's car assembly unit to make compact cars.

"The principal lenders to Daewoo Motors - ICICI Bank, IDBI and Exim Bank - have accepted the offer, subject to approval by the General Motors board, financial institutions, judicial and government authorities," a General Motors press release said. Rothschild India is General Motors' financial adviser for the deal.

General Motors India Vice-President (External Affairs) P Balendran told Business Standard that an offer had been made to buy only the car assembly unit and not the engine and transmission unit.

"The lenders have agreed to our proposal. We will now conduct due diligence, which will take about 2-3 months. The final offer will be made after that," he said, but did not disclose the price that had been offered to the lenders.

The plant at Surajpur near Delhi, which also includes an engine and a transmission unit, a paint shop and a captive power plant, was put up for sale in 2002 following Daewoo Motors India's inability to clear debt of about Rs 1,000 crore to the financial institutions.

The sale will put an end to hectic efforts by the three lenders to find a buyer among a host of suitors, including General Motors, Ford, Tata Motors, Hyundai and Sundaram Clayton.

Asked about General Motors' renewed interest in Daewoo Motors India, Balendran said it was largely influenced by the change in outlook on the Indian automobile market. Car sales in the country climbed 27.4 per cent to 555,000 during April-January 2003-04.

General Motors is likely to use the Daewoo facility to relaunch the small car Matiz under the Chevrolet brand next year. It recently started making the Matiz in China, renaming it as the Chevrolet Spark.

Production stopped at the Surajpur plant after Daewoo Motors India was left out of a $1.2 billion deal between its parent company and a consortium of companies led by General Motors. The Indian arm made the Matiz and mid-size cars Cielo and Nexia before its South Korean parent went bankrupt in November 2000.

Since Daewoo Motors India expressed inability to clear its debt, the lenders have been fighting with the South Korean management of Daewoo for control of the company's board and assets.