Daewoo is forced into bankrupty, with effects felt in Australia 9/11/00

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9^th November, 2000

Financial collapse felt by Australia’s car industry

The ailing Daewoo Motor Company has been declared bankrupt.

Daewoo, which has been on a debt-workout program since July last year and has been running on emergency bank funds, defaulted on nearly $40 million of debt on Monday.

Under South Korean law, a company goes bankrupt if it fails to honor its commercial papers for two straight days.

The carmaker is expected to be put under court receivership, which would see the installation of new management and a freeze on all debts.

General Motors has been negotiating to buy the firm since September, but that possible sale to GM is likely to be delayed by the receivership process.

However, Daewoo’s problems are having an even more immediate effect on Australia’s car industry, as Holden has been making engines for the Korean carmaker for several years.

When Daewoo slashed its orders for engines last month, Holden in Victoria was forced to sack 100 casual workers and to make plans for another 100 permanent redundancies. Those plans now look certain to be implemented.

Bankruptcy for Daewoo might yet mean a complete halt to its operations, affecting plants not only in Australia but in the UK, India, China and Eastern Europe.