Korean carmakers move to help ailing Kia
Korean carmakers move to help ailing Kia
SEOUL (Reuter): South Korea's two largest carmakers agreed yesterday to inject cash into a core unit of the Kia Group in a move which officials of the troubled conglomerate called a major breakthrough.
A Kia statement said Hyundai Motor Co, the country's largest carmaker, and unlisted Daewoo Motor Co agreed in principle to buy stakes in Kia Steel Co, which makes speciality steel used to make cars.
In a hastily arranged meeting yesterday, Hyundai Motor honorary chairman Chung Se-yung, Daewoo Group chairman Kim Woo- choong and Kia Group chairman Kim Sun-hong agreed that their companies would form a consortium to save Kia Steel.
"The three chairmen agreed on measures to save Kia Steel, which holds the key for the Kia Group to overcome its management crisis," said Kia spokesman Jeun Sang-jin.
"This is a major breakthrough and could provide a turning point for our group," he told Reuters by telephone.
The agreement by the three tycoons came on the eve of a crucial meeting of Kia creditors to discuss steps on the fate of the embattled conglomerate.
Kia Group's creditors have selected 18 of the group's 38 affiliates for bail-out under a scheme they forged voluntarily in April to prevent major companies from folding. Kia Steel is one of the 18.
The Kia Group, South Korea's eighth largest conglomerate, has run into financial problems because of local sales slump suffered by its flagship Kia Motors Corp and its commercial vehicle unit Asia Motors Co.
Under the agreement reached yesterday, Hyundai Motor, Daewoo Motor and Kia Motors would form a consortium to run Kia Steel. The three carmakers will have equal stakes in Kia Steel.
The Kia statement said the three automakers agreed to start working-level negotiations to work out details of the consortium.
On Wednesday, Kia creditors failed to produce a detailed bailout plan as they ruled that the group's self-rescue plans were not sufficient.
The creditors, who demanded that Kia executives resign and that Asia Motors be sold, are due to try again on Friday.
Yesterday's surprise announcement by the three tycoons followed a local newspaper report that Hyundai Motor and Daewoo were discussing a plan to jointly take over Kia Motors and had agreed in principle to the deal.
The two automakers officially denied that such an agreement had been made, but some officials of the companies and analysts said Kia would probably end up in the hands of one or two of the nation's top conglomerates. Other analysts disagreed.
"Today's deal for Kia Steel is needed to secure supply of speciality steel products for Hyundai and Daewoo. I think it is rash to link it to the takeover of Kia Motors," said Chang Choong-rynn, motor analyst at Daewoo Securities.