'Business as usual' for Daewoo in UK as parent goes bankrupt

Daewoo Motors, South Korea's third-largest car maker and one of the symbols of its former economic might, went bankrupt yesterday, laden with £7bn of debt, in the country's biggest ever business failure.

Daewoo Motors, South Korea's third-largest car maker and one of the symbols of its former economic might, went bankrupt yesterday, laden with £7bn of debt, in the country's biggest ever business failure.

The bankruptcy was declared by the company's creditors after the management failed to win union consent for a credit restructuring that would have cost 3,500 jobs. Court receivers will now take responsibility for the sell-off of the group, with General Motors and its partner Fiat the only real suitors.

There were fears yesterday that the bankruptcy could delay the sale and throw into doubt the future of Daewoo operations worldwide, including those in Britain and Eastern Europe. As many as 19,000 jobs are reckoned to be at risk in South Korea alone once the effects of the failure on suppliers and dealers are taken into account.

In Britain, where Daewoo employs about 1,700, the company put a bright face on the announcement and insisted that jobs were not at risk. Jackie McCamley, a spokeswoman for its UK subsidiary, Daewoo Cars, said: "It is business as usual for us in the UK. There are no redundancies."

The firm said in a statement: "Daewoo Motor, the parent company of Daewoo Cars Ltd, announced that it has entered into a company restructuring programme. This is not bankruptcy and it is not receivership as we know it here in the UK... Daewoo customers can be confident that their warranties and service packages will be honoured. Daewoo Cars is a self-sufficient subsidiary that does not rely on funds from Korea."

Daewoo Cars runs 131 sales outlets in the British Isles, employing about 1,000 people, and 200 staff at headquarters in Hertfordshire. Last month several hundred employees at thedesign centre in Worthing went without salary cheques for almost a month after Ford abruptly scrapped its bid for Daewoo in September. Yesterday Ms McCamley said: "Employees have been paid on time ever since and will continue to be paid on time."

The design centre has already been downsized from 750 to 500 employees, with 113 made redundant. The plant was bought from International Automotive Design in 1994 by Daewoo, which has since invested £15m a year in it.

Yesterday David Fleming, of the Manufacturing Science and Finance Union, which represents 30 per cent of the centre's workforce, said: "Morale has been very low... but management here has very little control. The people [here] have long thought that the best option was for it to be sold off." Hyundai and DaimlerChrysler are among companies to have shown interest in the centre, said the union.

Ms McCamley said: "The decision about the centre will come from Korea and from the creditors. If GM and Fiat are the people who take over, it's up to them. At this moment we can't say whether we want to sell it or not."

The Daewoo failure came as the creditors of another once-great South Korean conglomerate, the Hyundai group, yesterday agreed to roll over 690 billion won (£424m) in loans until the end of the year to help the country's largest builder avoid the threat of bankruptcy.