GM Daewoo Auto & Technology Co., the South Korean unit of General Motors Corp. (GM) has asked for emergency funding from Korea Development Bank as it faces a liquidity crunch, a KDB official said Friday.

The official, who declined to be named, told Dow Jones Newswires the automaker has already reached its credit limit of 1.3 trillion won (US$865 million) from KDB and commercial banks, and GM Daewoo has KRW125 billion in loans coming due in October.

In total, GM Daewoo owes KRW1.055 trillion to the state-run KDB.

The official declined to say how much the automaker was seeking in aid noting an amount hasn't been discussed yet, but Yonhap News Agency reported Friday the company has asked for KRW1 trillion as it faces a liquidity crunch.

"We will decide whether to offer financial aid to GM Daewoo after reviewing documents about the company's financial status," said the KDB official.

GM Daewoo confirmed the request made to KDB and said it will submit formal documents for financial help.

"We are in discussions with the Korean government and KDB to secure credit lines during the current global credit market liquidity shortage in order to fund new product development plans and new plant investment projects," GM Daewoo spokesman Park Hae-ho said.

Park said GM Daewoo President and Chief Executive Michael Grimaldi met KDB Governor Min Euoo-sung last Friday to ask for financial support.

GM Daewoo's woes underscore the difficulties automakers around the globe are facing as they grapple with a slump in demand as consumers tighten their purse strings amid the global economic downturn. They also highlight the dire situation at its parent General Motors. In a revamped restructuring plan submitted to the U.S. treasury on Tuesday, General Motors said it needs up to $16.6 billion in federal assistance on top of the $13.4 billion in loans it has received since December. General Motors said it might need as much as $100 billion in financing from the U.S. government if it were to go through the traditional bankruptcy process.

GM Daewoo was set up in 2002 when General Motors and its partners bought a majority stake in the automobile unit of bankrupt South Korean conglomerate Daewoo Group, which collapsed in 1998 under mountains of debt.

GM Daewoo was one of a few profitable overseas units under General Motors, but the U.S. company's own financial problems have also made it difficult for the South Korean unit.

In January, GM Daewoo's total sales fell 51% from a year earlier to 45,842 units, compared with the industry's 35% drop. GM Daewoo has adjusted production at its three South Korean plants in Bupyeong, Gunsan and Changwon to keep inventory low amid lower demand.

On Feb. 11, two days before his visit to KDB, Grimaldi met Knowledge Economy Minister Lee Youn-ho to request financial aid from the government, according to a ministry official. She said that the government rejected the request because it is against the law for it to financially support a company or an industry.

While it remains unclear whether KDB will step in, the state-run bank has bailed out other distressed South Korean companies in the past. In late December, nine creditors of Hynix Semiconductors Inc. (000660.SE) including KDB agreed to provide KRW800 billion in financial aid to the chipmaker, which has suffered from mounting losses amid a chip industry glut.

-By Kyong-Ae Choi and Jin-Young Yook, Dow Jones Newswires; 822-2198-2236; kyong-ae.choi@dowjones.com