The government said yesterday that parts suppliers to troubled carmakers Ssangyong Motor and GM Daewoo would get 240 billion won ($177.4 million) in liquidity support from a joint loan guarantee fund made by the local governments and financial firms.

Officials said the Ministry of Knowledge Economy and the Financial Services Commission agreed with Incheon Metropolitan City, Gyeonggi Province and five heads of financial companies to support the cash-strapped parts suppliers in Incheon and Gyeonggi. They signed a memorandum of understanding on the agreement.

The 240 billion won guarantee fund will come from the Korea Credit Guarantee Fund and the KIBO Technology Fund. The fund will get 5 billion won each from Incheon City and Gyeonggi Province, and 10 billion won pooled from the Industrial Bank of Korea, Shinhan Bank and the National Agricultural Cooperative Federation of Korea.

The total 20 billion won fund is worth a 240 billion won credit guarantee, the ministry said.

The government has introduced "coexisting guarantee programs" through which conglomerates and banks invest money in a credit guarantee fund to help temporarily liquidity-squeezed small partner firms stay afloat in the face of the global financial crisis.

Early this month, five conglomerates including Samsung Electronics and four banks invested 49.7 billion to 820 billion won in guarantees for petrochemical partner firms. In January, Hyundai Motor, POSCO and Hynix made a joint fund with the IBK, Shinhan Bank and Woori Bank to invest 24 billion won to create 700 billion won worth of liquidity for parts suppliers. "As the seriously troubled Ssangyong Motor and GM Daewoo cannot help support their parts suppliers, the liquidity squeeze is getting worse," a ministry official said.

"Therefore, the central government, local governments and the financial industry have jointly come up with a support measure," he said.

Ssangyong is under court receivership and GM Daewoo is facing growing uncertainties stemming from troubles at its parent company General Motors.