Daewoo Motor, South Korea's second-largest carmaker, seemed set to be declared bankrupt today after unions rejected job cuts demanded by creditors in return for new loans.
It was given a slim reprieve yesterday when the state-run Korea Development Bank, Daewoo's main creditor, said it would delay a decision to place the carmaker under court receivership until today, in the hope that the unions would agree to reducing the 19,000-strong workforce by a fifth.
Daewoo has defaulted on loans totalling $77 million (€89.55 million) this week, which has brought it to the brink of insolvency. But the unions remained defiant, saying they would not consent to the job cuts under the threat of bankruptcy.
Bankruptcy could hurt efforts to sell the carmaker to General Motors, while threatening the survival of 5,000 subcontractors. Creditors might have to write off additional debts of $4.1 billion on top of those already provisioned.
Daewoo would be the third South Korean carmaker to go bankrupt since the financial crisis of 1997. Kia Motors was declared insolvent in 1997 before being sold to Hyundai Motor, South Korea's largest carmaker.
