GM CEO seeks fresh loans from SKorean bank

October 14, 2009 06:15:23 PM

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The head of US giant General Motors will hold talks with a South Korean bank Wednesday to try to secure hundreds of millions of dollars in fresh loans for a troubled local subsidiary, officials said.

GM CEO Fritz Henderson will meet top officials of state-run Korea Development Bank (KDB), the key creditor of GM Daewoo Auto and Technology, a GM Daewoo spokesman said.

The meeting comes a week after the bank threatened not to roll over loans or provide fresh funds to GM Daewoo unless the US parent agrees to its demands.

"Today's meeting between Henderson and KDB officials is expected to focus on our request for loans," a GM Daewoo spokesman told AFP, declining to give details.

GM Daewoo has been hit by falling demand due to the global downturn, while the US giant emerged from bankruptcy in July under a government-backed rescue plan.

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

It is also reportedly planning a 491.2 billion won share sale this month to secure working capital. But the bank wants the carmaker to increase its share offering and accept other conditions in return for aid.

"If GM does not accept our demands, KDB will not participate in a new share sale and plans to retrieve maturing currency forwards or loans," KDB chief Min Euoo-Sung said last week.

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.

"We have yet to fix the size of our share offering," the GM Daewoo spokesman said, adding the issue would be discussed at talks between Henderson and KDB officials.

He refused to confirm news reports that GM Daewoo's problems were aggravated after being hit with foreign currency hedging losses amounting to 2.7 trillion won.

The US giant holds a 51 percent stake in GM Daewoo while KDB owns 28 percent.

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.