Magazine article Business Asia

Locals Bid to Buy Daewoo

Magazine article Business Asia

Locals Bid to Buy Daewoo

Article excerpt

South Korea's auto workers, fearing disaster if foreigners buy Daewoo Motor and shop for parts abroad, have stepped up a campaign to thwart such a sale, while a domestic small business group said it might make a bid.

The Korea Federation of Small and Medium Business (KFSB) said it would raise up to 1.7 trillion won (US$1.5 billion) to secure a controlling stake of Daewoo Motor.

"The sale of Daewoo Motor will eventually ruin Korea's car industry," said Park Sang Hee, chairman at the KFSB.

"Given the strategic importance of the car industry, it is desirable for us to take over Daewoo Motor, possibly with large local companies."

General Motors and Ford Motor have expressed interest in Daewoo Motor, which is being sold as part of a massive debt restructuring effort led by creditors of 12 Daewoo Group firms.

The Daewoo conglomerate, once a star performer in Korea under the leadership of founder Kim Woo Choong, has hit hard times.

A due diligence study of the company's flagship automaking arm shows it has liabilities of 17.9 trillion won (US$15.9 billion) versus assets of 11.8 trillion won.

Analysts said they questioned the purpose of the federation's campaign, and suggested it might be targeted more at raising the price of Daewoo than taking over the automaker.

An auto analyst at LG Securities said a takeover of Daewoo Motor by a group of small businesses made little economic sense because the management of the large automaker needs the capital and technology that small companies lack.

"The idea of these small businesses running a carmaker sounds bizarre," said the analyst. "They don't have the technology and they don't have the money."

The KFSB's Park acknowledged it might have to seek a foreign alliance after its takeover of Daewoo to manage the Korean carmaker, but stressed the aim right now was to block the company from falling into foreign hands. …

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