Daewoo assets sale not to be a smooth drive

Mumbai: The move by financial institutions (FIs) to sell the assets of the beleaguered Daewoo Motors India Ltd is not going to be a smooth drive in the light that the three probable buyers of the company Tata Engineering and Locomotive Company, Maruti Udyog and Hyundai Motors have adopted a lukewarm approach to the sale procedures.

FI sources say the huge debt exposure of Daewoo Motors and the current surplus industry capacity are the major roadblocks for the sale of the company. In May 2002, the lenders to the local arm of South Koreas bankrupt Daewoo Corporation had decided to sell the loss-making car company to recover the loans.

IDBI, ICICI and Exim Bank of India had lent nearly Rs 10 billion to Daewoo Motors, which was the third largest carmaker in India before its parent company went bankrupt in November 2000. Daewoo Motors has a total investment of around Rs 30 billion.

The three leading Indian carmakers Maruti Udyog, Hyundai Motor and Telco have all invested in large manufacturing facilities of their own and do not need extra capacity. Daewoo has a huge capacity of 300,000 engine and transmission units per year. Telco, in response to a proposal forwarded by the FIs recently, has written to the FIs declining to take over Daewoos assets, the sources say.

Telcos plant in Pune, which has a capacity to produce over 1lakh cars annually, has more-than-adequate capacity to handle any sudden rush in demand for Indica. Telco, therefore, does not want to be burdened with unnecessary additional capacity, the sources add. "Japans Suzuki Corporation, which had acquired the government stake in Maruti with a huge investment, would not go for another investment and capacity addition. Both Maruti and Hyundai havent responded to the FIs proposal so far."

The sources say most of Daewoos outstanding loans were for setting up an ETA plant. "Any buyer would have to make fresh investments to make alterations to the ETA line." The Mumbai-based Debt Recovery Tribunal, on a petition from the FIs, had earlier appointed a court receiver to manage the Daewoo assets.

Sales of the companys Matiz hatchback, which used to be between 4,000 to 5,000 units per month, have fallen to less than 500 cars a month on concern over the availability of spares and the companys ability to continue providing services. But General Motors, which had taken over some of the Korean companys assets world over, has said it will continue to supply the parts to Daewoo Motor for three more years.

Daewoo Motor India reported a loss of Rs 2.98 billion in the nine months ending December 2001 on sales of Rs 1.96 billion.