Daewoo-Ssangyong deal a boon for customers

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.