Oh Hogen, chairman of a committee representing Daewoo Motor's creditors,said Ford has six weeks to conduct a due diligence on the debt-ladenautomaker before submitting final proposals.

"The committee expects to sign a definitive agreement shortly afterwards,"Oh told a news conference.

Ford offered better capabilities "to improve the corporate value of Daewoomotor, willingness to transfer technology, provide job security andcontribute to the growth and development of the components industry," hesaid.

Oh declined to elaborate on details of Ford's winning proposals, citing aconfidentiality agreement. But Financial Supervisory Commission chairman LeeYong-keun said Ford offered 7.7 trillion won ($6.9 billion) for Daewoo Motorand its affiliates, along with the passenger car division of sister company,Ssangyong Motor.

In India, where both Ford and Daewoo have a strong presence, the takeoverwill give Ford immediate access to the most-happening product in the Indiansmall car segment. The Matiz has been averaging sales of nearly 7,000 cars amonth, and has been acknowledged by the connoiseur as the epitome ofelegance on four wheels. Undoubtedly, the car is the jewel in Daewoo'scrown.

Ford's Indian subsidiary has every reason to be proud of the Ikon, which isslated to take a commanding 30 per cent share in the mid-size segment. Dailyproduction of the car at the company's Chennai plant is about 75 units,slated to go up to 100 in the next couple of months.

Both Ford and Daewoo had to go through a bumpy ride in their initial yearsbefore striking upon a winning combination. The American automaker firstintroduced the Escort, a decent performer which still failed because of itshigh pricing. Daewoo had a safe, durable product in the Cielo, but tepidmarketing efforts coupled with a slump in the mid-size segment saw it gothrough hard times. To make things worse, the company announced asubstantial price cut for the car which, effectively, decimated its "premiumproduct" image.

Ford learnt its lesson. It first established itself in the Indian jointventure by taking a controlling stake (today it is 83 per cent, whilepartner Mahindra & Mahindra, which has put a cap on its equity investment,holds the balance) and then kicked off an advertising campaign for the Ikon.

The car is competitively priced, and its marketing has become increasinglyaggressive. A lot of hard work went into positioning the car, right from itschristening, and today the Ikon has surged ahead of its competitors, likethe Mitsubishi Lancer, Honda City, Opel Corsa, and Siena.

The same holds good for the Matiz. Initial reactions to the pricing were notencouraging. A 796cc car, which was almost twice as expensive as theestablished Maruti 800! The consumer, however, appreciated its superiortechnological features and classy looks. The Matiz was a winner, and Daewoohad every reason to feel good.

If everything goes according to plan, Ford, as the new owner of Daewoo, willhave two successful brands in the small and mid-size categories. The companyhas indicated that it will be working on its own small car for India, a planthat can wait for a while now. More importantly, both plants (its own inChennai and Daewoo's in Surajpur) are state-of-the-art facilities, withcombined capacities of over two lakh units.

The General Motors-Fiat combine was touted as the favourite in the biddingfor Daewoo Motor. The two companies will now have to do some soul searchingfor their Indian plans. Both their recent products, the Corsa and Siena,have been hampered by tepid retail efforts, and this has been reflected intheir low monthly sales. Market leader Maruti is in all sorts of trouble,with its overall market share down to 54 per cent from 74 per cent in undertwo years. This will leave Ford in a strong position with Hyundai, which hasestablished itself here through the Santro and Accent.

Ford's biggest advantage with the Matiz is the car's international image. Asper figures provided by the Korean Automobile Manufacturer Association,through the whole of calendar 1999, small car exports from Korea totallednearly 3.5 lakh units, of which Daewoo's share alone through the Matiz was astaggering 78 per cent. In volume terms, this translated into 2.71 lakhunits, which were despatched to the UK, Poland, Japan, and other countries.Significantly, this figure of Matiz exports was five times more thanHyundai's Atoz, which is sold as the Santro in India, and nearly 15 timesthat of Kia's small car, the Visto. Statistics show that even in Japan,where the Matiz is a recent entrant, Daewoo has targeted sales of 30,000cars annually by the turn of 2002.

In Poland, Matiz sales accounted for 33 per cent of Daewoo's overall figureof 1.87 lakh units. The Korean carmaker is the leader here with a marketshare of 28 per cent, barely ahead of Fiat, whose products in Poland includethe Alfa Romeo and Lancia.

Ford's acquisition of Daewoo will also make it the world's largest automaker(in terms of capacity). Today, General Motors has a capacity of 8.14 millionunits, with Ford some way behind with 6.82 million. This will, however,change to 8.77 million once Ford includes Daewoo's capacity of 1.95million.

The company will also gets access to the Korean automaker's manufacturingoperations in India, China, Poland, Romania, and Czechoslovakia. Analystssaid nothing was certain with tough talks ahead.

"We expect the final price to come in at a much lower level as there is nocompetition in the bidding, and it is likely that more contingentliabilities will pop out during due diligence," said Chia Liang Lian ofMerrill Lynch Securities in Seoul. Ford's was one of three bids forDaewoo.

DaimlerChrysler AG and South Korea's biggest automaker Hyundai Motorsubmitted a joint bid, as did General Motors and Italy's Fiat SpA.Oh said the committee will ask the other candidates for fresh proposalsshould negotiations fail with Ford. Ford's executive director for AsiaPacific New Business Development said the world's number two carmaker'sselection as sole bidder "will expedite the process of negotiations."

"As we indicated in our proposal, our vision is to establish a strategicpartnership with Daewoo," he said.

Ford made an unsuccessful bid to buy Korea's Kia Motors in 1998. HyundaiMotor, a rival in the Daewoo bidding, eventually won control of thethen-insolvent Kia.

The Hyundai-Daimler bid appeared to be in trouble from the start. JuergenSchrempp, chairman of Daimler Chrysler, told a German newspaper theUS-German auto giant was only interested in "attractive" parts of Daewoo,not a full-blown takeover.

Korean regulators had also expressed concern over the anti-trustimplications of a bid from Hyundai, which already controls 70 per cent ofthe Korean car market.

"We don't think the assessment of proposals was done fairly," said a HyundaiMotor spokesman.

Merrill Lynch's Chia said Hyundai is better off, at least in the near term,without Daewoo.

"I think Hyundai will have a better return by solidifying the collaborationwith (DaimlerChrysler)," Chia said.

Unlisted Daewoo Motor's affiliates soared on the news. Ssangyong Motorclosed at its 15 per cent daily limit-up at 2,815. Daewoo Motor sales closedlimit-up per cent at 4,195.

Daewoo Motor has an annual output capacity of two million vehicles, and isprized as a strong competitor in South Korea, south-east Asia and EasternEurope. Korea's second-largest automaker sold more than 945,000 vehicleslast year.

The deal with Ford would mark the first time a foreign company has takenover a major manufacturer in South Korea, a global competitor in ships,vehicles and electronics.

General Motors, which broke off a 15-year alliance with Daewoo in 1992 overdifferences in marketing strategy, would seem to be the biggest loser in thebattle for Daewoo. The company aggressively pursued Daewoo in the biddingwar against arch rival Ford.

"We still think we offered the best proposal for Daewoo Motor," said LeeKi-sup, GM Korea's spokesman.

General Motors was believed to have offered about $5 billion. Daewoo Motor'screditors rescued the automaker and 11 other Daewoo Group firms fromimminent bankruptcy last year.

They have assessed Daewoo Motor's liabilities at 17.9 trillion won ($16.01billion), against 11.8 trillion won in assets.

Ford to start second round of due diligence
Ford Motor Company will start a second round of due diligence followed bydetailed diligence of Daewoo Motor Corporation in the next eight weeks,company manager (public affairs) Meera Kumar told The Financial Express byphone from South Korea. She reiterated that Ford was the final choice in thebidding process, implying there was no way either General Motors-Fiat, orDaimlerChrysler-Hyundai, would up their offers. "This is final. The earlierplans assumed that five players would be part of the bidding process.

Finally, only three parties emerged, of which Ford was the only one tosubmit a bid on its own," Kumar said.