Seoul - General Motors (GM) was seeking tax favours from the South Korean government as a condition for any takeover of the troubled Daewoo Motor, banking officials said yesterday.
Jung Keun-Yong, the president of the Korea Development Bank, told parliament: "On the basis of due diligence results, GM is now conducting a review of post-takeover business plans.
"GM is also having talks with Daewoo Motor on other key issues, including labour and taxes accompanying the acquisition."
A bank official said Jung apparently meant GM wanted tax favours from the government.
Jung also told the financial subcommittee of parliament that creditor banks and GM would start full talks once the US car maker had finished its review of the viability of an acquisition.
Jung defended the cash lifelines thrown to Daewoo Motor, saying this was inevitable to prevent a chain of bankruptcies among suppliers and to prop up the value of the company.
Up until the end of March, creditor banks had funnelled 419,6 billion won out of 727,9 billion won (R4,5 billion) of financial aid, promised in the first half of this year, for Daewoo Motor.
The government said yesterday that it would provide 70 billion won in emergency financial aid for Korea Delphi Automotive Systems, Daewoo Motor's biggest supplier of car parts.
The finance and economy ministry said the fresh loan would cover Korea Delphi bonds worth 60 billion won, which mature on April 25, and another 10 billion won in an emergency operating fund.
However, a recent audit of Daewoo Motor revealed that the company's assets were halved last year to 9,1 trillion won while its debt increased by 4,7 trillion won to a whopping 22,3 trillion won. This means the car maker will be left with 13,2 trillion won of debt even if it sells all its assets.
Ahn Kwon, an accounting firm, said in an audit report to the financial supervisory committee that last year Daweoo posted a 580 billion won operating loss compared with a 612 billion won of loss the previous year as sales fell to 5,78 trillion won from 6,12 trillion won in 1999.
"We cast serious doubts over the possibility of Daewoo Motor continuing to exist as a business unit," the accountants said in the report, which was leaked to the press.