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