Samsung swaps car unit for Daewoo firm

Samsung swaps car unit for Daewoo firm

SEOUL (Reuters): South Korea's Samsung will swap its troubled
car business for the debt-burdened electronics company of its
rival Daewoo as the country's bloated conglomerates on Monday
announced moves to shed scores of their units.

Seeking to kick start its sputtering corporate restructuring
campaign, the government also said the family-run conglomerates
known as chaebol plan to raise 70 trillion won ($58 billion)
through foreign investments, capital increases and asset sales.

With the public mostly blaming the chaebol for their economic
misery and foreign investors skeptical about the pace of
corporate reform, President Kim Dae-jung called the heads of the
top five groups to the Blue House for some presidential
jawboning.

The only concrete deal to emerge so far is Samsung Group
agreeing "in principle" to selling its infant car business to
Daewoo Group in exchange for unlisted Daewoo Electronics.

Samsung is the country's biggest electronics producer and the
world's largest producer of memory chips. Unlisted Daewoo Motors
is Korea's second largest carmaker after Hyundai Motors.

Daewoo Electronics had debts of 3.7 trillion won at the end of
June against assets of 4.8 trillion won, while Samsung Motors'
debts were 3.6 trillion against assets of 4.3 trillion won,
analysts said.

Analysts said the fate of Samsung Motors was sealed when it
failed to take over Kia Motors and Asia Motors Hyundai Group won
an auction for the two insolvent car companies in October.

The Financial Supervisory Commission, which is in charge of
corporate restructuring, said the two groups would draw up plans
to implement a swap of Samsung Motors for Daewoo Electronics by
Dec. 15.

"Daewoo Group would undergo restructuring to focus on cars now
that it has swapped for Samsung Motors," said Lee Hun-jai,
chairman of the financial watchdog.

He told reporters the big five would reduce the total number
of their units to 130 from 264.

Hyundai Group would focus on automobiles, construction,
electronics, heavy industries, chemicals and financial services.

Samsung Group would concentrate on the electronics, financial,
trade and services sectors. Daewoo would focus on vehicles,
shipbuilding, construction, trade and financial services.

Lee said the five would also seek 30 trillion won in foreign
capital, 20 trillion won in capital increases and raise another
20 trillion won by selling parts of their businesses.

The commission said the chaebol planned to clear 12.7 trillion
won worth of cross debt guarantees among affiliates in different
business sectors by the end of this year.

They currently stand at 15 trillion won with total cross debt
guarantees among affiliates at 19.3 trillion, it said.

The commission would take disciplinary action against
conglomerates that do not follow their restructuring pledges, Lee
said. "If their plans are not carried out, disciplinary measures
such as cutting credit lines would take place immediately."

"The president will personally inspect how their plans are
followed every quarter," Lee said.

"This is only the beginning," he said. "We will radically
improve the financial structure of domestic companies which we
will not be ashamed of in the international arena."

Separately, John Dodsworth, chief representative of the
International Monetary Fund in Seoul, said too much emphasis had
been placed on the so-called big deals.

"There doesn't seem to be a big difference from their previous
rhetoric," Dodsworth said of Monday's announcements. "But what we
expect from this is that their loss-making affiliates would be
pruned."

South Korea had to accept a $58.35 billion rescue package from
the IMF after a plunging currency and a series of corporate
failures strained the banking system and pushed the country close
to sovereign default.