Daewoo-Ssangyong deal a boon for customers

By John Aglionby

DAEWOO's takeover of Ssangyong Motor should benefit all concerned, the Ssangyong distributor in Indonesia believes.

Angky Camaro, the managing director of Indomobil, which includes Ssangyong in its stable, is confident that the deal between the two South Korean companies announced Monday, and effective from next Monday, will result in both firms emerging stronger from the current economic crisis.

He said: "Of course, the details have not been finalized yet. But it seems this acquisition will give a boost to both companies.

"Daewoo is a very experienced company with a high-quantity output but has little new technology developed, whereas Ssangyong has the latest four-wheel drive technology but not the resources or capacity to develop it."

Under the deal, Daewoo is absorbing 53.5 percent of Ssangyong's equity and two trillion won (US$1.6 billion) of its debt.

Daewoo Motor chairman Kim Tae-Gou said: "I expect this merger to have a big impact (on South Korea's automotive industry) because it will effectively reduce duplication in investment."

"We know there are problems with Ssangyong's balance sheets but we will be able to handle it because Ssangyong Motor is competitive abroad," he added.

The pressure on the balance sheets has been eased by Ssangyong Motor's creditors promising to give a 10-year deferral on the payment of the company's principal debt and a 150 million won loan to Daewoo.

Kim said: "Now, we have laid the groundwork for a full production line-up for passenger cars, jeeps and commercial vehicles."

South Korean analysts are still skeptical that Daewoo will have enough funds to really profit from the merger, particularly as its own debts exceed 26 trillion won.

Ssangyong Motor found itself in trouble after expanding far more quickly than was financially viable.

Angky said: "The product is good and quite successful in Korea but it was a case of too much investment -- more than US$2 million -- at once. Not even Daimler-Benz can afford that sort of investment.

"Ssangyong launched four new products but it did not have the backbone to market and support their activities."

Angky said he did not know what the impact would be in Indonesia.

"Ssangyong officially informed us on Wednesday and so, frankly speaking, I don't know yet what will happen here. At the moment it will just be business as usual."

He did not rule out talks with Daewoo, however, to bring it into the Indomobil fold. "We have not yet talked about it, but why not? We are open to anything."

In Indonesia, Ssangyong sells only its four-wheel drive Musso, called the Boxer, as a competitor to the Toyota Landcruiser and the Jeep Cherokee.

Launched earlier this year, the company has sold "more than 100, which will hopefully be 200 by the end of the year", Angky said.

The initial price was Rp 160 million ($37,000) but with the devaluation of the rupiah and consequent hike in import costs, Angky said the cost was now about Rp 200 million.

He added that Indomobil might also bring out another Ssangyong four-wheel drive, a shorter two-door version of the Musso, and also possibly a minibus.