The reports said that industry and energy minister Park Tae-young and chief presidential economic aide Kim Tae-dong agreed to the plan on Friday. The South Korea government planned to nationalise the two automakers by letting state-run Korea Development Bank become the largest shareholder in Kia through a debt-to-equity swap.

The media reports further said that under the scenario agreed between Parkand Kim, Kia would be ordered to reduce its capital and then issue new shares amounting to more than the reduced capital.The new shares, which therefore, would be more than 50 per cent of recapitalised Kia Motors, would be put up for sale at an auction by not later than September, the reports said.

The reports gave no source for their articles, and Park or Kim could not immediately be reached for comment.Responding to aReuters inquiry, a senior official at the industry and energy ministry said he had not received any instruction from minister Park regarding the matter.