Hyundai, DC May Team Up on Daewoo Bid

Published June 19th, 2000 - 02:00 GMT

Top South Korean automaker Hyundai Motor expects to hook up with German-US giant DaimlerChrysler AG in a joint bid for rival Daewoo and might announce such plans later this week, Reuters quoted a Hyundai executive as saying on Monday.  

"Our talks on forming a consortium with DaimlerChrysler for Daewoo are in their final stage," said the official, who was not named by the news agency. "We will be able to conclude the talks by June 24."  

According to Reuters, he said it looked almost certain that Hyundai and DaimlerChrysler would join hands to take over ailing Daewoo, Korea's second-largest automaker, which creditors expect to sell via auction by the end of September.  

Moreover, Bloomberg News reported on the same day that Hyundai and DaimlerChrysler will hold company board meetings on June 24 to approve an alliance between the two car companies, citing the Yonhap News Agency, who were quoting Hyundai's president.  

Yonhap, citing an unidentified Hyundai Motor official, was reported by Bloomberg as saying Hyundai Motor and DaimlerChrysler are planning separate bids for Daewoo, though their company boards may discuss setting up a consortium for the acquisition.  

According to the American news service, the alliance will include DaimlerChrysler taking a 10 percent stake in Hyundai Motor, joint development of a car fuel cell, and the joint operation of a Hyundai Motor truck plant, the report said, quoting Hyundai Motor President Lee Kye Ahn. 

According to Bloomberg, a 10 percent stake in Hyundai Motor would amount to $259.9 million, based on its current market value.  

Bloomberg said that pairing up with DaimlerChrysler may help Hyundai overcome the Korean government's opposition to Daewoo being swallowed by its bigger rival. They added that Hyundai already controls almost 75 percent of car sales in Korea, Asia's second-largest car market.  

On the other hand, DaimlerChrysler’s possible tie-up with Hyundai could provide the access the German automaker needs to one of the region's most closed car markets, Bloomberg added. It would also give it an edge over rivals General Motors Corp., Ford Motor Co. and Fiat SpA, which are bidding for Daewoo.  

Bloomberg stated that DaimlerChrysler is in the process of buying 34 percent of Mitsubishi Motor Corp., and the Japanese automaker owns 1.8 percent of Hyundai Motor. Mitsubishi Corp., a Japanese trading house, owns 8.41 percent of the Japanese carmaker and 3 percent of Hyundai Motor.  

Hyundai Motor is vying with General Motors Corp., Ford Motor Co., DaimlerChrysler, and Fiat Spa to acquire Daewoo. The bidding deadline for Daewoo is June 26.  

Hyundai Motor spokesman Lee said he wasn't able to confirm or deny any plan for a separate bid for Daewoo.  

Both Korea's largest industrial group and the German-American automaker had so far declined to give any positive confirmation to the reports. 

"We've seen the Yonhap report, but do not wish to comment," Lee Bong Jae, a Seoul-based Hyundai Motor spokesman, told Reuters. "Sooner or later, we will make our position clear." 

Meanwhile, industry sources said DaimlerChrysler, the world's fifth largest automaker, was expected to announce details of its plans to expand its Asian commercial vehicles business soon – Albawaba.com 

Earlier this month DaimlerChrysler had declined to comment on speculations over a joint bid with Hyundai. Bloomberg recalled that Hyundai Motor Chairman Chung Mong Koo told reporters early June that he made "considerable progress" in talks with DaimlerChrysler about joining forces in bidding for Daewoo.  

Rueters added that the process to bid on Daewoo begins with non-binding proposals due at the auction office by June 26.  

"There's no way to take part in the auction by ourselves because of monopoly and capital issues," the Hyundai official said.  

According to Reuters, Hyundai Motor and its sister firm Kia Motors Corp command about a 75 percent of the Korean car market, where almost one million vehicles were sold last year.  

Its share would approach 100 percent if it takes over Daewoo, and the government was likely to reject such domination, analysts have said.  

Still, Hyundai remains keen and has responded with a plan under which it hopes to link up with a foreign partner that would take 40 percent of Daewoo and Hyundai 20 percent, with 40 percent left to Daewoo's current creditors.  

Hyundai Motor's president Lee Choong-koo said last week Hyundai wanted to limit its stake in Daewoo to 20 percent to avoid creating fears about it holding a virtual monopoly in the domestic market.  

DaimlerChrysler and Hyundai are among five companies expected to bid for Daewoo which, along with the rest of the Daewoo Group , ran into financial trouble last July and landed the group's 12 core firms in the hands of creditors.  

General Motors , Ford Motor and Italy's Fiat SpA are the other three heavyweights expected to participate.  

An official at the auction office said one or two bidders would be selected by June 30 and given about two months to conduct a final due diligence on Daewoo before submitting binding offers with deposits.  

DaimlerChrysler in March agreed to pay $2.1 billion for a controlling stake in Mitsubishi Motors Corp to build up its small car business – Albawaba.com (several sources). 

© 2000 Al Bawaba (www.albawaba.com)

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