GM says ready to join GM Daewoo rights offer

A woman walks past GM Daewoo's sport utility vehicle Winstorm at the Seoul Motor Show in Goyang, near Seoul, April 2, 2009.

INCHEON, South Korea (Reuters) - The chief executive of General Motors Co GM.UL reiterated on Thursday that the U.S. automaker would join a rights offering by its struggling South Korean unit, but gave no hint whether GM would put in as much as the unit's biggest creditor wants.

Fritz Henderson, speaking to reporters at a GM Daewoo plant on the outskirts of Seoul, said he had "very positive" talks with the government-run Korea Development Bank (KDB), GM Daewoo's leading creditor.

"GM has resources around the world. Resources can be used not only from the U.S., including operations here in Korea. We are able to provide support, if necessary," Henderson said when asked if GM would support a rights offer.

KDB has said it may call back maturing loans and foreign exchange forward contracts if GM does not pump more money into the 51 percent-owned unit, which accounts for about a quarter of GM's global auto production.

Last month, GM Daewoo Automotive and Technology said it would raise 491.2 billion won ($424.1 million) by selling new shares to existing shareholders.

KDB has said it wants that sum to be more than doubled.

GM is barred from using any of its own $50 billion lifeline from the U.S. government to support overseas operations and would have to dip into money from its non-U.S. operations.

Henderson's visit to South Korea follows eight months of talks between GM and KDB to secure about 1 trillion won in new loans for the cash-strapped car maker, the third largest in South Korea behind Hyundai Motor Co (005380.KS) and Kia Motors Corp (000270.KS).

At stake is a key hub for small car design and engineering that is crucial to GM's plans to sell more vehicles in emerging markets and meet tougher U.S. fuel economy standards.

"GM needs GM Daewoo as it is responsible for small cars, which are attracting more customers around the globe," said Cho Soo-hong, autos analyst at Hyundai Securities.

"Given GM Daewoo's contribution to the economy, KDB is expected to eventually provide financial support to GM Daewoo," Cho added.

MEETS PRESIDENT

Henderson later met President Lee Myung-bak, but there was no word on whether they touched on the issue of extra financing.

Analysts say the government, fearful of losing jobs, is keen to save GM Daewoo, which employs 17,000 and has 400 direct vendors.

They say in the current political and economic climate, KDB has little choice but to hand a lifeline to the unit, though it will push hard to extract concessions from GM.

Over the past year, the downturn for GM Daewoo's parent has undercut its profitability. It lost 876 billion won in 2008. Its January-September sales are down 43 percent at 401,808 vehicles.

Last year, GM Daewoo chalked up 2.3 trillion won in derivatives trading losses.

GM bought most of the assets of distressed automaker Daewoo Motor Co in 2002.

GM's own financial woes have complicated refinancing for its South Korean subsidiary, whose $2 billion credit line offered by KDB as part of the 2002 deal, was exhausted in February.

($1=1158.2 Won)

(Writing by Jonathan Thatcher, Editing by Ian Geoghegan)