Kia nationalization plan unaffected by IMF bailout<\/p>\n
SEOUL (AFP): South Korean plans to nationalize the insolvent
\nKia Motors Co. has not been affected by the International
\nMonetary Fund (IMF)-induced restructuring program, a senior
\nofficial said yesterday.<\/p>\n
Vice finance and economy minister Kang Man-soo told
\njournalists that the state-invested Korea Development Bank (KDB)
\nwould convert its loans to Kia worth 320 billion won (US$262
\nmillion) into equity shares.<\/p>\n
The KDB is preparing to organize a meeting of Kia shareholders
\nto reach a final decision on the issue, he said.<\/p>\n
Kang stressed that the conversion of debt into shares would
\nnot constitute a government subsidy, banned by the World Trade
\nOrganization.<\/p>\n
The IMF did not object to the move during negotiations over
\nthe 60-billion-dollar bailout for Seoul, he said.<\/p>\n
But Yonhap News Agency said Kia, which collapsed in October
\nunder more than nine trillion won ($6.4 billion) in debt, could
\nnot be nationalized this year as initially planned by the
\ngovernment because of the ongoing financial crunch.<\/p>\n
Even when Kia becomes a state corporation, it may be
\neventually sold off to a private firm, it said.<\/p>\n
Finance and economy ministry officials said it would be up to
\nthe next government, which takes office in February, to decide
\nwhether to maintain Kia as a state company or sell it to the
\nprivate sector.<\/p>\n
Meanwhile, car production at Kia Motors ground to a halt
\nTuesday after subcontractors and suppliers stopped providing
\nparts and demanded cash settlement of Kia's outstanding bills,
\nYonhap said.<\/p>\n
The developments came as South Korea's over-invested
\nautomobile industry entered into a drastic restructuring.<\/p>\n
In the first major industrial takeover since the IMF bailout,
\nthe Daewoo Group on Monday announced its purchase of a 53.5
\npercent stake in the jeep-maker Ssangyong Motor Co. and $1.6
\nbillion of its debt.<\/p>\n
The takeover will immediately boost the annual production
\ncapacity of Daewoo Motor Co. from the current 1.06 million units
\nto 1.28 million units.<\/p>\n
The deal is expected to speed up the shake-out of South
\nKorea's auto industry, centered on the giant Hyundai Motor Co.
\nwith an annual production capacity of 1.65 million cars, and on
\nthe second strongest Daewoo Motor Co.<\/p>\n
Commentators said Samsung Motor Co., which has invested 2.6
\ntrillion won ($1.8 billion) to muscle into the field, faced a
\ndilemma over whether to pursue its plan to invest another 10
\ntrillion won to build up its capacity to one million units
\nannually, or bow out of the business.<\/p>",
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