Seoul, March 22: South Korea's Hyundai group plans to takeover financially troubled Kia Motors Corp, a Hyundai spokesman said on Sunday."Hyundai Group is currently pursuing taking over Kia Motors," said a spokesman for the group.
He said it was not clear which units of Hyundai would takeover Kia, but said a report for the acquisition was written up by Hyundai Motor Co Ltd and the group's research arm.
"In order to create an auto manufacturer which has an annual production capacity of 2.5 million and is globally competitive, it is better to merge firms rather than increase production of existing firms, and Hyundai is the only company which can takeover Kia and normalise operations," said the Hyundai report. "Hyundai Group is currently pursuing taking over Kia Motors," said a spokesman for the group.
He said it was not clear which units of Hyundai would takeover Kia, but said a report for the acquisition was written up by Hyundai Motor Co Ltd and the group's research arm.
"In order to create an automanufacturer which has an annual production capacity of 2.5 million and is globally competitive, it is better to merge firms rather than increase production of existing firms, and Hyundai is the only company which can takeover Kia and normalise operations," said the Hyundai report. A spokesman at Kia Motors said he was not able to comment immediately on the issue.
Kia Motors, the flagship of South Korea's previously eighth largest Kia Group, filed for court receivership last year as it teetered on failure.
The government has said that it would make the state-run Korea Development Bank (KDB) the largest shareholder of Kia Motors by changing the debt for shares.
"For the terms and conditions of the takeover of Kia Motors, the case of Daewoo's takeover of Sangyong Motor can be referred to, and in future negotiations with the creditors (of Kia), a 10 to 20 year delay on repayment of principal can be considered," said the report.
South Korea's Daewoo Group in January sealed a deal to take over a 51.98 percent stake in Sangyong Motor Co Ltd for 64.2 billion won"In order to create an auto manufacturer which has an annual production capacity of 2.5 million and is globally competitive, it is better to merge firms rather than increase production of existing firms, and Hyundai is the only company which can take over Kia and normalise operations," said an internal report by Hyundai distributed to the media.
A spokesman for the group said: "Hyundai Group is currently pursuing taking over Kia Motors."
He said it was not clear which units of Hyundai would takeover Kia, but said the report was written by South Korea's leading carmaker Hyundai Motor Co Ltd and the group's research arm.
A spokesman at Kia Motors said he was not able to comment immediately on the issue.
Some industry sources questioned Hyundai's sudden announcement, saying it was testing the waters for a takeover with a green light from the government.
The announcement follows President Kim Dae-jung's comments on Thursday that the country'stroubled firms should be allowed to sink.
"The nation is being smothered as companies that should fail are not allowed to go out of business...The issue of ailing companies should be concluded quickly," Kim said referring to Kia Group, Halla Group and Hanbo Steel which have shown no signs of recovery.
Kia Motors, the flagship of South Korea's previously eighth largest Kia Group, filed for court receivership in October as it teetered on failure. Kia still awaits a ruling by the court, but its assets have been frozen.
The firm's woes played a pivotal role in sending the world's 11th largest economy into a tailspin and South Korea is now being bailed out by a $58.35 billion International Monetary Fund package.
The government has said it would make state-run Korea Development Bank (KDB) the largest shareholder of Kia Motors by converting debt for shares, and said KDB would ultimately sell its stake to a third party or on the market.
Industry analysts say Samsung Motors, which recently launched itsbusiness, could be seeking equity cooperation with Ford to jointly take over Kia. Ford Motor along with its Japanese subsidiary, Mazda MotorCorp, are the single largest shareholders in Kia with a combined stake of about 17 per cent.
But Hyundai stressed that a foreign takeover would threaten the existence of Korea's car industry.
"South Korea's entire auto industry could be destroyed if foreign firms, which are ahead of South Korean firms in terms of technology, capital and competitiveness, takeover managerial rights of a local auto firm," Hyundai said.
"For South Korea's auto industry to survive we must abide by the principle that foreign funds can participate in management but not take over managerial rights," it said.
It also suggested that Korea's car industry be restructured leaving one or two major automakers. It said Hyundai and Kia would have an annual production capacity of over 2 million, placing it among the top ten world carmakers.
"Hyundai would give the utmost support to normaliseKia's operations as soon as possible," the report said adding that the terms and conditions of the takeover could follow Daewoo's takeover of Sangyong Motor.
South Korea's Daewoo Group in January sealed a deal to take over a 51.98 per cent stake in Ssangyong Motor Co Ltd for 64.2 billion won.
Hyundai said it would negotiate with Kia creditors for a 10-to 20-year delay on repayment of debt principal.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
