What Happened To Holden's GM Daewoo Shares?

[JoeT]

GM To Take Larger Stake In Daewoo

Ken Gratton
Carpoint.com.au

Holden conspicuous by its absence in the closer relations between GM and GM-DAT

General Motors now owns just over 70 per cent of GM-DAT (GM Daewoo Auto & Technology Co). The multinational giant officially increased its shareholding in the South Korean manufacturer last week, following an equity rights issue approved by GM Daewoo's board of directors back in August.

Of the existing shareholders with an interest in GM-DAT, GM was the only company to take part in the issuance. The other shareholders, Korean Development Bank ('KDB'), Shanghai Automotive Industry Corporation and Suzuki Motor Corporation elected not to subscribe.

GM's increased share in GM Daewoo provides additional capital of 491.2 billion Won -- money which will cover "general corporate purposes", according to a press release from GM. Those purposes will include repayment of maturing debt.

It's good news for GM, which is heavily reliant on its South Korean subsidiary for the manufacture and supply of small-to-medium front-wheel drive passenger cars and the Captiva SUV around the globe. In GM's current situation, GM-DAT can pull up some of the slack left by the still pending sale of Opel. And the Korean company being based in a relatively low-labour cost nation like South Korea will help too.

The question remains, however, what happened to Holden's involvement? When GM-DAT was established near the end of 2002, GM's shareholding in the newly acquired company was reportedly overseen by Holden and the Australian subsidiary held a seat on the board of GM-DAT.

In a press release issued by Holden and dating back to October 25, 2002, the following statement appeared: "Holden also announced it would become the GM shareholder in GM Daewoo Auto & Technology Company (GM Daewoo), the global company created to acquire key assets from Daewoo Motor Company. The US$251 million investment means Holden will hold 42.1 per cent of GM Daewoo common shares."

As recently as June of this year, Holden's erstwhile MD, Mark Reuss, said: "We do hold some of the debt for GM Daewoo" and "I'm not going to get into how much, but it's around 50 per cent".

Given GM in the US can barely wipe its nose without asking consent from the US government, from whence came the funds to increase the shareholding in GM Daewoo? Not Holden, we're told by local PR Manager for Holden, Scott Whiffin. In fact, it appears that Holden's financial tie-up with GM Daewoo -- mentioned by the company's boss less than five months ago -- is taking on all the status of modern myth.

"Holden has no representation on the GM-DAT board," Whiffin told the Carsales Network last week.

"In the wake of the latest equity rights issue, GM's shareholding has increased to 70.1 per cent (other shareholders are KDB 17 per cent, Suzuki 6.8 per cent and SAIC 6 per cent). However, Holden does not own that company and owns no shares in GM-DAT."

Click here to continue article

[mattyman1010]

Ain't a fan of Daewoo (that includes Holdenwoos and chevrowoos), never have never will be. I'd rather GM sell off Daewoo and keep Opel, sure Daewoo is in a better financial situation but Opel is far better for small-medium car development.

[mmciau]

"Book entry" as per normal!!

The old 3 sets of books probably - the 'sale' set, the "taxation department" set and the real set!1


Mike

[mikmak]

Very interesting.

Why, I wonder, would Holden diverge itself from GM-DAT when it is about to release 3 versions of a derivative product? Perhaps an exchange of IP rights for ownership meaning Holden gets the benefit of the product but without the aforementioned liability and reduced costs for per unit production? I'm really just grasping at straws here because I'm not up to speed with how this type of thing is managed anyway.

Ken has bought up a likely valid recipient of what was the lions share (), being GM China, or, is GM IO considered a separate entity? Clearly there is much more detail in relation to the true structural nature of GM as a global corporation.

[chinamonty]

It is like having a house in your child's name and then when convenient transferring it back. They probably paid it back to GMNA as a dividend

[RedVee8]

Very strange indeed.

[benroethig]

Originally Posted by mikmak

Very interesting.

Why, I wonder, would Holden diverge itself from GM-DAT when it is about to release 3 versions of a derivative product? Perhaps an exchange of IP rights for ownership meaning Holden gets the benefit of the product but without the aforementioned liability and reduced costs for per unit production? I'm really just grasping at straws here because I'm not up to speed with how this type of thing is managed anyway.

You're talking as if GM Holden ltd is somehow an independent company and they somehow have a choice. What happened? GM, as the 100% owner, exercised its right to transfer assets from one division or another.

[redTT]

Can have Holden buy something only to have GM take it away for free, it just doesnt work like that. There are other parties involved in Holden, most notably the Australian government.

[carbarrister]

"Can have Holden buy something only to have GM take it away for free, it just doesnt work like that. There are other parties involved in Holden, most notably the Australian government."

Trust me. Holden never really bought the shares in the first place and had nothing to them moving elsewhere. These financial moves were driven by tax issues and the GM bankruptcy. Holden was a temporary repository. As an example, GM parked its ownership of the Fiat-GM Powertrain venture with OnStar which had no involvement in the venture. It was all rubber stamped by the boards and understood by the various governments and tax authorities.

[Rocket 88]

I'm sure we don't know what happened because they don't want us to know what happened...

I think they use the Goverment loans from Deutchland/Opel to buy more Daewoo. Kidding.

This is a good move by the new GM. If you're going to compete with Hyundai's business model, you better be able to develope vehicle in similar cost structure, and only Daewoo can do that. The products will get better and GM will be better off from this.

[Shoot]

Ain't a fan of Daewoo (that includes Holdenwoos and chevrowoos), never have never will be.

And why is that? Never will be is a long time and doesn't seem too rational to me. GM Daewoo quality is up and future product is looking good. GM Daewoo is a vital part of GM, especially when it comes to the all important Asian market - where the growth is. South Korea is a lower cost manufacturing country for now so it makes sense to be invested there.

[SimonDavid]

Originally Posted by carbarrister

"Can have Holden buy something only to have GM take it away for free, it just doesnt work like that. There are other parties involved in Holden, most notably the Australian government."

Trust me. Holden never really bought the shares in the first place and had nothing to them moving elsewhere. These financial moves were driven by tax issues and the GM bankruptcy. Holden was a temporary repository. As an example, GM parked its ownership of the Fiat-GM Powertrain venture with OnStar which had no involvement in the venture. It was all rubber stamped by the boards and understood by the various governments and tax authorities.

I agree, it was most llikely a book entry for tax purposes IMHO. Park some assets temporarily outside the US in a nice safe country to keep them out of the bankruptcy process. Maybe Holden had some accumulated tax losses they could offset Daewoo profits against.

Most multinational corporations have complex structures for tax and legal reasons, often you find all the brands and some of the IP are legally owned by "IP ownership company NL" which is incorporated in Amsterdam and then rents the brands back to the national operating companies (Netherlands has favourable tax treatment on this).

[MonaroSS]

Originally Posted by benroethig

You're talking as if GM Holden ltd is somehow an independent company and they somehow have a choice. What happened? GM, as the 100% owner, exercised its right to transfer assets from one division or another.

Actually GM Holden Ltd IS an independent company and is NOT a 'Division' of GM like Cadillac, Buick, GMC and Chevrolet which ARE Divisions and not seperate companies. That means under the law holden's books must balance even when dealing with a parent company.

So when the shares left something of similar 'book' value must have replaced it. But then again the shares in Daewoo may have at the time been maked to market for a zero or negative worth given it's debts in the current climate.

[mikmak]

Originally Posted by benroethig

You're talking as if GM Holden ltd is somehow an independent company and they somehow have a choice. What happened? GM, as the 100% owner, exercised its right to transfer assets from one division or another.

You don't miss a chance do you?

[zl-1]

Trading some or all of a subsidiary's equity holdings is pretty common. Imagine GM decided all overseas operations would be under ownership of, say, a company called GM Holdings International (a name I just made up, btw, no need to rush and Google it). Next step would be to instruct subsidiaries with equity holdings on those overseas operations to swap their equity stakes for something else, like cash, real estate, inventory, etc...