General Motors has signed a agreed to buy bankrupt Daewoo Motor. The memorandum of understanding signed on Friday sees GM pay $400m for a 67% stake in a joint holding company, with the existing creditors holding the remaining 33% share.

A period of due diligence will now be conducted lasting no more than three months, after which the final takeover agreement will be signed.

The takeover package will include the Kunsan and Changwon manufacturing plants in Korea and two foreign factories – Daewoo Motor Egypt and Vietnam Daewoo Motor. In addition, Shanghai Daewoo Motor Service (China) will be acquired.

GM has agreed to buy production from the Pupyong factory, which will be run by a management team coordinated by the Korea Development Bank, DMC's primary creditor. Within six years, GM will have the option to buy the Pupyong factory, depending on the viability of it. The research and design facility at Pupyong will, however, be included in the takeover by GM. Daewoo Cars Ltd in the UK is one of 21 sales companies in Western Europe, North and South America and Australia who will also be included in the takeover package.

General Motors has agreed to continue to employ all the staff of the Daewoo companies it is taking over and the existing creditors have agreed to an injection of capital into the company.

The announcement follows the news that Daewoo Motor has posted its fifth consecutive month of profit in August.