After a year of negotiations, General Motors signed a non-binding agreement Friday to acquire control of bankrupt Daewoo Motor Co. of South Korea for $400 million.
The deal with creditors of Daewoo and Daewoo's management was a boost for South Korea's fitful economic reform program and gives the U.S. auto giant a stepping stone into the Asian market.
Under the deal, GM will take over two of three local Daewoo Motor plants in Kusan and Changwon as well as 22 overseas subsidiaries, along with manufacturing facilities in Egypt and Vietnam.
Daewoo's other overseas manufacturing facilities in 12 countries, including Poland, the Czech Republic and China, were excluded from the deal.
The deal also did not cover Daewoo's largest plant at Bupyong west of Seoul, which experts say is inefficient. GM said it would consider buying the Bupyong facility later.
As part of the deal, GM will invest $400 million for a 67 percent stake in a new company that will take over Daewoo. Daewoo's creditors will provide $197 million. The new company will issue $1.2 billion worth of preferred stock to creditors, and take over $320 million of debt incurred by Daewoo's overseas operations.