DaimlerChrysler buys 10% stake in Hyundai

DaimlerChrysler buys 10% stake in Hyundai
ASSOCIATED PRESS

JUNE 26: US-German auto giant DaimlerChrysler AG will acquire a 10 per cent stake in South Korea's leading carmaker Hyundai Motor Co for $ 428 million, both sides said today.

The capital tie-up strengthened Hyundai's strategy to become a global player by ranking among the top five automakers by 2010. The announcement boosted Hyundai's share prices in early trading on the Korean Stock Exchange.

The tie-up also boosted chances of a joint bid to be submitted by the two firms to buy debt-ridden Daewoo Motor Co in an international auction due today. "Hyundai aims to become a major global player by the end of this decade with four million units, and this is one of the steps to reach that goal," said Steve Kitson, a Hyundai spokesman.

The capital tie-up calls for the two companies to set up separate 50-50 joint venture to operate Hyundai's commercial vehicle plant with an annual capacity of 100,000 vehicles.

DaimlerChrysler has already agreed to buy a major stake in Japan's Mitsubishi Motors Corp. But as the deal does not include production of trucks, DaimlerChrysler has turned to Hyundai to strengthen its presence in Asia, industry officials said.

Japan's Mitsubishi group, including its car making arm, Mitsubishi Motor, holds a 4.36 per cent interest in Hyundai. Since word of DaimlerChrysler's interest in Hyundai circulated per cent in early trading.

Daewoo Motor, South Korea's second largest automaker with $ 18 billion in debt, is being auctioned off by its creditor banks. General Motors Corp, Ford Motor Co, DaimlerChrysler, Fiat SpA and Hyundai have been invited to submit bids.

Before the DaimlerChrysler-Hyundai deal, GM and Ford were considered front-runners in Daewoo bidding. Now, GM and Fiat were reportedly moving to submit a joint bid for Daewoo. 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'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 three billion dollars.

Daewoo has the capacity to make two 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 dollars on revenues of five billion dollars. 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 dollars. That gave Renault a 70.1 per cent stake in the Korean company.