GM, DaimlerChrysler Form Alliances
Monday, June 26th 2000, 12:00 am
By: News On 6
SEOUL, South Korea (AP) â€” An international bidding war to buy debt-ridden Daewoo Motor Co. intensified Monday when DaimlerChrysler and General Motors formed separate alliances to make offers for South Korea's second biggest carmaker.
U.S.-German auto giant DaimlerChrysler acquired a 10 percent stake in South Korea's leading carmaker Hyundai Motor Co. for $428 million and the companies submitted a joint bid to buy Daewoo.
General Motors Corp., the world's biggest car company, formed a separate alliance with Fiat SpA of Italy to bid for Daewoo.
Ford Motor Co. also submitted a bid for Daewoo before Monday's deadline for bids passed. The size of the bids was not disclosed.
Daewoo Motor, which has $18 billion in debt, is being auctioned off by its creditor banks. GM, Ford, DaimlerChrysler, Fiat and Hyundai had been invited to submit bids.
Daewoo's creditors plan to select two finalists by Friday and one successful bidder by the end of September. The successful bidding price is expected to reach $3 billion.
DaimlerChrysler and Hyundai announced their alliance early Monday and said they also plan joint development and production of passenger cars and commercial vehicles.
Several hours later, GM and Fiat announced that they were forming an alliance to jointly acquire Daewoo. They said they expected the bid committee to favorably consider their proposal which includes keeping Daewoo's brand, guarantees for full employment of Daewoo workers and plans to allow creditors to turn part of their loans to Daewoo into equity.
``By combining resources and capabilities of the two organizations, it makes sense to work together and submit a joint bid proposal to the (bidding) committee,'' Alan G. Perriton, executive in charge of GM Asia Pacific operations, said at a news conference.
The deal between DaimlerChrysler and Hyundai was aimed at strengthening Hyundai's strategy to become a global player by ranking among the top five automakers by 2010.
``Hyundai aims to become a major global player by the end of this decade with 4 million units, and this is one of the steps to reach that goal,'' said Stephen Kitson, a Hyundai spokesman.
The alliance calls for the two companies to set up a 50-50 joint venture to operate Hyundai's commercial vehicle plant with an annual capacity of 100,000 trucks and other commercial vehicles.
DaimlerChrysler has already agreed to buy a major stake in Japan's Mitsubishi Motors Corp. But as that deal does not include the production of trucks, industry officials say DaimlerChrysler turned to Hyundai to strengthen its presence in Asia.
Japan's Mitsubishi group, including its carmaking arm, Mitsubishi Motor, holds a 4.36 percent interest in Hyundai.
Before the DaimlerChrysler-Hyundai deal, GM and Ford were considered the front-runners in the Daewoo bidding.
Korean government officials have said they would only approve a Hyundai bid if the Korean carmaker joined with a foreign company to avoid a potential monopoly.
Daewoo has the capacity to make 2 million vehicles a year in plants stretching from the Philippines to Poland. But Daewoo borrowed heavily to expand, and cash flow from operations eventually fell short. Then the Asian currency crisis hit South Korea in late 1997.
Last year, Daewoo Motor lost $3.9 billion on revenues of $5 billion. Creditors demanded a major overhaul, and a restructuring committee began seeking a buyer.
Hyundai acquired the nation's third-largest car firm, Kia Motor Corp., last year, which allows it to control two-thirds of the nation's 1.2 million vehicle domestic car market.
In April, French carmaker Renault bought another debt-ridden South Korean auto firm, Samsung Motors Inc., for $562 million. That gave Renault a 70.1 percent stake in the Korean company.