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News > International
Daewoo rivals line up
June 27, 2000: 6:35 a.m. ET

Global auto industry leaders scramble to control troubled Korean firm
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LONDON (CNNfn) - The auction of South Korea's debt-laden Daewoo Motor Co. has quickly changed from a fire sale into a battle between the heavyweight global automakers for position in the rebounding Asian market.

The near-collapse last July of Daewoo Group, Korea's second-largest conglomerate, has prompted the sale of 11 of its businesses in a bid to pay off creditors.

The parent company is due to choose on Jun. 30 between the three bidders seeking to take control of the country's No. 2 automaker. The process highlights the complex web of alliances built up in the global industry over the graphicpast 12 months.

The closing date for bids was Monday, setting the scene for a clash between the industry titans eager to position themselves for a rebound in the Asian auto market. The region's car industry had been becalmed by the economic crises that afflicted many Asian countries in 1997.

Global market leader General Motors Inc. (GM: Research, Estimates) seen as weak in Asia, and Ford Motor Co. (F: Research, Estimates), the second-biggest U.S. automaker, both plan bids for Daewoo.

General Motors has teamed up with Italy's Fiat SpA to make a joint bid, the first fruit of an alliance that the U.S. and Italian firms signed in March. Ford is bidding to buy the Korean company by itself.

DaimlerChrysler AG (FDCX) and Hyundai Motor Co. announced plans Monday to submit a joint bid as part of a broader alliance between the German-controlled firm and Korea's largest automaker. DaimlerChrysler said it would seal the partnership by paying around $420 million for a 10 percent stake in Hyundai Motor.

That alliance would also bring in Japan's Mitsubishi Motor Co., in which DaimlerChrysler took a 34 percent stake in March for $2.1 billion. The Japanese firm already has an alliance with Hyundai.

While all of the potential bidders are pledging to keep the Daewoo brand, and would manage the firm by creating a new holding company, the sale could mark a big step in a handing virtually the whole of Korea's auto industry to overseas owners.

In April, France's Renault SA (PRNO) bought a 70 percent stake in third-ranked Samsung Motor Co. for $560 million. And Daimler's 10 percent holding in Hyundai could expand to a full takeover at a later date, some analysts have said, as the German-American company has secured an option to raise its stake.

Daewoo's emerging market


Daewoo Motor is one of the more attractive assets being unloaded by its parent, suggested analysts. It produced 945,000 vehicles last year, selling a third of them in its domestic market, and has the capacity to build 2 million vehicles a year.

With a well established brand name in southeast Asia and central Europe,  the company has also expanded rapidly in the Indian market.

GM is seeking to rekindle a 15-year relationship with Daewoo that ended in 1992.

"Our business plan will give Daewoo the best opportunity for rapid graphicnormalization, while preserving the identity of Daewoo Motor, its product brand and its ability to play its role as a stand-alone competitor," GM Chief Executive Officer G. Richard Wagoner said in a statement Monday.

The non-binding GM-Fiat proposal calls for a new company to be formed with GM as the largest shareholder, Fiat holding up to 20 percent, and the balance likely divided among Daewoo creditors and other constituents of Daewoo.

A deal with Daewoo would extend GM's existing investments in the region, including a 20 percent stake in Japan's Fuji Heavy Industries Inc., the maker of Subaru cars, and minority holdings in mini-vehicle maker Suzuki Motor Co. and truckmaker Isuzu Motors Co.

Ford's solo bid also focused on Daewoo's established presence in Asia and central Europe.

"Where Daewoo is strong, we are weak," Meera Kumar, a member of Ford's bidding team told Reuters. "It's no secret that the markets in North America and Europe are near saturation -- growth is going to come from Asia, where we don't have much of a presence, and in Eastern Europe."

Daewoo Group is due to choose a buyer for its auto unit by September.

The auction stems from the near collapse of the parent firm last July. The automaker and 11 other substantial firms in the Daewoo Group ran into financial trouble, prompting emergency loans from creditors, who assessed Daewoo Motor's liabilities at 17.9 trillion won ($16 billion), outweighing 11.8 trillion won in assets. Back to top

-- from staff and wire reports

  RELATED STORIES

Daimler ties Hyundai deal - Jun. 26, 2000

Renault inks Samsung deal - Apr. 13, 2000

Daimler buys Mitsubishi stake - Mar. 27, 2000

GM buys Fuji stake - Dec. 10, 1999

  RELATED SITES

DaimlerChrysler

Fiat

Ford

General Motors

Daewoo Motor

Hyundai Motor


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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.