The Hindu Business Line : GM's Daewoo unit buy plan may hit Govt roadblock

THE proposed sell-off of Daewoo Motors' Surajpur assembly unit to General Motors may run into trouble, with the erstwhile company's liabilities to the Government becoming a roadblock to the deal.

According to sources, the Government is keen to recover its dues from the sale of Daewoo's assets and is not only keeping a close watch on the financial details of the deal, but will also take legal recourse following a recent order by the Debt Recovery Tribunal (DRT) in Mumbai.

The DRT, in its order, had held that the ICICI-led lender consortium would have first charge on Daewoo's assets for recovery of dues, ahead of the Government's claim. The Government's dues are in the form of Custom duty claims amounting to over Rs 1,000 crore and also dues resulting from alleged financial mismanagement by the company.

According to the sources, the Government is seriously considering an appeal against the DRT order soon. It is currently examining the order and evaluating the legal recourses available to it. Explaining further, the sources said, "Based on the outcome of our examination of the order, we will decide whether to approach DRT or a higher appellate authority."

Meanwhile, a General Motors spokesperson confirmed that the diligence process of Daewoo's assets by GM is complete and that the company is currently in financial negotiations with the lenders. "A decision on the deal will be made in the next few days," the spokesperson said while refusing to divulge any details about the negotiations.

He, however, emphasised that GM is interested in only purchasing the assets of Daewoo India, and the question of sharing any "encumbrances" does not arise.

GM, earlier in the year, said that if the proposed deal goes through, it would use the Surajpur assembly unit for making small cars for the Indian market. The US auto giant had acquired Daewoo Motors' passenger car business following the erstwhile Korean Chaebol's bankruptcy during the Asian currency crises. The company, however, had left out the Indian operations in the global deal.

Meanwhile, the ICICI-led consortium is also in talks with a Russian firm AvtoVAZ (an associate of GM) and with Rico Auto to sell the engine-transmission-axle (ETA) unit at Daewoo India's facility. AvtoVAZ plans to acquire the machinery at the ETA unit and transport it for use at its Russian facility.

More Stories on : Cars | Mergers & Acquisitions | Non-Performing Assets

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