GM may invest $65 million on Daewoo plant

By siliconindia   |   Monday, 11 October 2004, 19:30 IST
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BANGALORE: Apart from buying the erstwhile Daewoo car plant in Surajpur (UP), General Motors (GM) may have to invest Rs 200-300 crore in putting up a paint shop. Officials said the paint shop will take about 10 months to become operational and work on it will be kicked off once the Debt Recovery Tribunal (DRT) dealing with the Daewoo matter approves its acquisition. The Daewoo plant is saddled with nearly Rs 3,000 crore of outstandings. As the due-diligence of the plant is complete, GM is likely to approach the DRT in a few days now with a acquisition proposal. The plant is critical to GM’s plan to introduce its small car, Spark (upgraded Matiz with 1.1 litre petrol engine), in the Indian market. The car giant’s existing plant in Halol, Gujarat, will have the capacity to roll out 55,000 cars by early next year once its capacity expansion programme is complete. Since GM has plans to unveil three-four more cars in India over the next three years including another volume car, Kalos, a four/five door notchback/hatchback, the Surajpur plant assumes significance as it offers more production capacity in the shortest possible time. The Daewoo India’s list of outstandings include Rs 1,400 crore towards primary debtors, Rs 1,200 crore in customs duties (EPCG obligations) and Rs 300 crore in working capital loans and interest. The primary creditors IDBI, ICICI and Exim Bank are owed around Rs 1,050 crore which coupled with the interest component works out to an estimated Rs 1,400 crore. Daewoo has unfulfilled export commitments — under the EPCG scheme — which translates to about Rs 1,200 crore in customs dues. The company had raised working capital loans from banks like Canara Bank, SBI, Indian Overseas Bank and others. There are some excise dues and sundry payments, which will total up to Rs 100 crore. GM’s acquisition path is full of potholes because of the multi-dimensional outstandings. While the DRT has ruled recently that the proceeds of the asset sale should be used to first settle the dues of the primary creditors, the government is said to be planning to petition the tribunal to consider their claims too in the GM-Daewoo deal. Officials said that GM has made it clear from the start that the facility has to be transferred free of any excumberances.

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