Banks to help carmakers in restructuring efforts

SEOUL, Dec. 28 (Yonhap) -- Domestic banks are expected to help troubled carmakers
that engage in worthwhile restructuring efforts and have future growth potential,
financial sources said Sunday.
The general guidelines outlined by lenders like the state-run Korea Development
Bank (KDB) come as some local carmakers are feeling the pinch of the global
economic slowdown that has adversely affected sales in both local and overseas
markets.
"Carmakers have started to make requests about possible support, but before aid
is given, they must streamline operations," a KDB spokesperson stressed.
Of South Korean carmakers, Ssangyong Motor Co. and GM Daewoo Auto & Technology
Co. are the most hard-pressed for funds, although the latter still has about
US$600 million in syndicated loans that it can take out under a deal reached with
financial institutions in 2002.
Ssangyong said it will hold talks with its union members, creditors and Shanghai
Automotive Industry Corp., its main shareholder, to find middle ground to save
the company.
The company, whose production line is geared to make sport utility vehicles, has
not been able to pay its workers this month, with rumors circulating in the stock
market that it may file for bankruptcy in January.
In the third quarter of this year, the company lost 28.2 billion won ($21.2
million), marking its fourth consecutive quarterly loss. Last month, the
automaker's sales plunged 63 percent from a year earlier to 3,835 units, causing
management to temporarily halt work to cope with the rise in inventory.
Other carmakers, including Hyundai Motor Co. and Kia Motors Corp., have not
requested assistance and are not facing any imminent liquidity problems, although
the country's largest carmakers have cut back on production in the face of weak
demand.
The South Korean government and financial regulators, meanwhile, said that they
cannot actively help carmakers since such assistance conflicts with World Trade
Organization guidelines.
The Ministry of Knowledge Economy said any decision to help companies depends on
creditors, adding that Seoul can only take steps to cut taxes, support financial
institutions and offer limited support for the research and development of
eco-friendly vehicles.
Reflecting this, financial regulators said they are considering steps to help
financial companies who can provide financial services to consumers who want to
buy new cars.
This roundabout tactic will cause the least trade friction with other countries
since it is similar to measures being implemented by the U.S. Federal Reserve
Board to help the embattled General Motors Corp., regulators said.
yonngong@yna.co.kr
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