Mohan, lets be accurate, as I read it Daewoo is selling 50% of their Motor division for $330 MM, not the whole company, and this division has about $3 billion in debts (which I presume will now be guarranteed by GM). Whether this is a bargain or not depends really on the assets that back these $3 billions in debt. I have no idea what the Motor division's balance sheet looks like, but if Daewoo is typical of the average chaebol and if a lot of their debt were dollar denominated prior to the won's swoon, I would not be surprised if GM might, for the time being, be paying a premium to net assets (at least until and if the won recovers).
I presume that the deal might have had some other "covenants" which are not public as yet covering closing off some automotive excess capacity (on Samsung's back?). If memory serve, I read somewhere that the current world demand is foe about 30 MM units per year, but the capacity worldwide to produce those is more than twice this figure, and that is where the main problem resides.
Zeev |
