Daewoo subcontractors face mass bankruptcies Daewoo Motor's parts suppliers are bracing for a chain of failures this week, which threaten to push the bankrupt automaker deeper into trouble, industry watchers warned yesterday. The watchers forecast that a string of bankruptcies among Daewoo's 9,300 plus subcontractors would be inevitable, starting late this week, in the aftermath of prolonged closures at Daewoo's main car plant in Pupyong, west of Seoul, and other local factories.

"About 360 billion won ($316 million) worth of Daewoo Motor-issued bills are to come due by the end of this month and additional 1 trillion won in debts and bills will mature by early next year," said a company executive.

"With Daewoo's debts and assets frozen in the wake of its Nov. 8 bankruptcy, the whole financial burden for the 360 billion won bills coming due this month will fall on the subcontractors," he said. Towards the end of this month, the components suppliers will approach their financial limits, coming closer to bankruptcy, he said.

In particular, Delphi Korea, one of the largest parts suppliers to Daewoo, is expected to fail to settle about 32 billion worth of bills, coming due Nov. 25, pushing hundreds of its own subcontractors to the brink of insolvency, the executive noted. Indeed, a die-casting supplier to Delphi Korea, based in North Kyongsang Province, was declared bankrupt Nov. 10 after failing to honor a 180 million won bill. Three more subcontractors to Delphi Korea followed suit in the same week.

Last Friday, the Inchon-based Seah Tubing, a supplier of brake components, also filed with the municipal authorities to close its plant in the city and lay off its 50 employees.

An executive at an Inchon-based Daewoo subcontractor complained that despite the government's promise to force banks to extend financial support to Daewoo parts suppliers, the bank branch offices are refusing to buy their bills, demanding collateral.

"Because of the unique characteristics of the auto industry, parts suppliers, once declared bankrupt, are not able to restart operations, even if loans are resumed by creditors later," he said.

Daewoo's creditor banks are scheduled to hold a meeting today but are not likely to discuss new funding for the automaker and its subcontractors, citing the union's continued resistance to layoffs.

Amid escalating disputes over layoffs, meanwhile, even the outlook for Daewoo's court receivership is clouded, said the watchers, refusing to rule out the possibility of liquidation. Due to the prolonged production disruptions, Daewoo's car sales at home and abroad are plummeting, while a growing number of employees are leaving the company.

Daewoo's main car plant in Pupyong yesterday remained closed for the eleventh consecutive day, as components supplies have been suspended by cash-strapped subcontractors. With Daewoo Motor rapidly losing its asset values, its potential buyer, the General Motors-Fiat consortium, floated a new proposal to selectively buy only parts of the failed automaker last week.

By Yoo Cheong-mo Staff reporter http://www.koreaherald.co.kr/SITE/data/html_dir/2000/11/20/200011200049.asp

-- Carl Jenkins (somewherepress@aol.com), November 19, 2000