| GM calls off bid for Daewoo's Surajpur plant
General Motors has dropped plans to buy Daewoo Motor India's car plant at Surajpur in Uttar Pradesh. What has prompted General Motors to call off the deal is the government's inordinate delay in reaching an out-of-court settlement with the lenders to the beleaguered plant and Arcil, an asset reconstruction fund overseeing the sale, sources close to the development said.
General Motors India president and managing director Rajeev Chaba could not be contacted. P Balendran, vice-president (corporate affairs) of General Motors India, neither denied nor confirmed the development. He said he was away from the country and, therefore, was not aware of any such development.
But sources said Alan Perinton, a General Motors executive based in the US and in charge of new business ventures, last week conveyed to Arcil the company's decision to call off the deal.
ICICI Bank, Industrial Development Bank of India nd Exim Bank were the three main lenders to the project with an exposure (principal amount) of over Rs 1,000 crore (Rs 10 billion). Both ICICI Bank and Exim Bank have sold their exposures to Arcil.
IDBI has transferred its exposure to the stressed assets stabilisation fund - a new unit created to take over the bank's non-performing assets.
Even though Arcil received an order from the Debt Recovery Tribunal in March, which allowed it to auction the plant, the government stalled the move by securing a stay from the Bombay high court.
The government claimed around Rs 1,500 crore {(Rs 15 billion) Rs 600 crore (Rs 6 billion) of principal amount plus interest}in Customs duty, which was waived for importing machinery for the Daewoo facility in UP under the export promotion credit guarantee scheme in mid-1990s.
While offering a duty concession, the government took a bank guarantee for 25 per cent of the concession {Rs 200 crore (Rs 2 billion) of a total of Rs 800 crore (Rs 8 billion)}, which it invoked after the company went belly up.
"Even though it was an unsecured credit, the lenders and the agency involved in the deal were willing to clear the government's dues through an out-of-court settlement. It was agreed that the proceeds of the auction will be used to partly settle Customs duty dues and in lieu of that, the government will give up its right to confiscate the plant and the machinery. It even received a Cabinet approval for that in July," sources pointed out.
But the government has not yet signed a memorandum of understanding on the proposed out-of-court settlement. General Motors, which entered the fray in February 2004, waited till last month before calling off the deal, the sources added.
General Motors India had plans to introduce a small car, Chevrolet Spark, by using the production facility of Daewoo. General Motors had announced that it would spend a few hundred million dollars to refurbish the Daewoo plant in order to make it suitable for Chevrolet Spark production.
General Motors India had also made it clear that if the acquisition did not materialise, it would set up a greenfield project for manufacturing small cars in India. To set up a greenfield project, an investment of Rs 500 crore (Rs 5 billion) in the country is required.
General Motors needs to set up a plant for small cars as they are an integral part of the company's growth plan in India. The company has set a target to sell about 160,000 cars by 2007-08.
General Motors had acquired Daewoo Motor's global operations, barring its India chapter, in 2000. The Debt Recovery Tribunal, Mumbai, had in March 2005, put Daewoo's assets in the Surajpur industrial area on sale and set a reserve price of Rs 1,103.09 crore (Rs 11.03 billion).
With General Motors backing out, Arcil is believed to have started scouting for new bidders. A couple of carmakers, including one domestic player, were showing interest in the plant, sources said. | 
7th October 2005, 10:56
