Ford scraps $7 b bid for Daewoo Motor

SEOUL, SEPT. 15. Ford Motor Co. on Friday scrapped its 7.7 trillion won ($6.9 billion) bid to buy South Korea's debt-laden Daewoo Motor, dealing a blow to the country's corporate restructuring drive and Ford's ambitions in Asia.

Ford's surprise announcement that it would not make a final bid for Daewoo abruptly ended a deal that should have been completed by the end of this month.The South Korea's share market plunged on the news, while the won skidded to a three-month closing low.

"We believed that a proposal was not possible that would be in the interest of Daewoo and Ford and their respective shareholders," Ford vice-chairman, Mr. Wayne Booker, said in a statement.

Ford's purchase would have been, by far, the largest foreign takeover of a Korean company and would have enabled it to near the output level of the world's top-ranked General Motors. But its pullout could open Korea's door to its global auto rivals.

The U.S. auto giant in June beat out joint bids by GM and Fiat SpA and DaimlerChrysler and Hyundai Motor for the right to conduct exclusive negotiations with Daewoo about taking over its assets.

"Bidding proposals from contenders other than Ford remain in effect," the Financial Supervisory Commission (FSC) Chairman, Mr. Lee Keun-Young, told reporters.

General Motors lost no time in expressing interest. "As we have said through the auction process, we continue to be interested in Daewoo Motor," said Mr. Kay Lee, public relations head at General Motors Korea. GM needed to consult with Fiat. "But we will be available to discuss the matter with responsible Korean parties, including Daewoo Motor creditors," Mr. Lee said.

Ford had reportedly offered $6.9 billion for Daewoo in its preliminary bid in June, earning it exclusive negotiating rights.

But after conducting due diligence in the last two months on unlisted Daewoo Motor's far-flung assets, Ford wanted to cut the price, possibly to below $5 billion, industry analysts said.

At issue apparently is the murky state of Daewoo's books, which analysts have long said failed to reflect deterioration in the auto company's assets since its parent group nearly went bankrupt last year and is now being dismembered by creditors.

On Friday, the FSC said it would ask state prosecutors to file charges against the group founder, Mr. Kim Woo-Choong, and 20 executives for distorting the books to show that in June 1999 the group's assets were $12.6 billion more than its total liabilities.

Creditors later discovered the group had $70 billion in liabilities - $26 bilion more than its total assets.The purchase of Daewoo would have added an annual capacity of 2.1 million vehicles and offered Ford immediate access to emerging markets such as Poland and those in Asia.

Ford spokeswoman in Seoul, Ms. Meera Kumar, told Reuters that Ford still viewed Asia as important. "It's the market to grow in." Daewoo Motor sold about 9.45 lakh vehicles last year, including almost 3.40 lakh units in South Korea, and is regarded as a strong competitor in the small car market at home and in Southeast Asia and Eastern Europe.

- Reuters

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Section  : Business
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