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Hyundai Wins Auction for Kia, Asia Motors

October 20, 1998|From Reuters

SEOUL — The South Korean government had strongly hinted it wanted Ford Motor Co. to take over debt-laden Kia Motors to bring in fresh capital and technology and underline the country's newfound openness to foreign investment.

But in the end, it was Hyundai, the country's largest conglomerate, that won the auction for Kia and its sister company, Asia Motors, in a development that looked more like the old Korea Inc. than the restructured one President Kim Dae-jung is trying to build.

"It's a classic chaebol solution of extending market share instead of aiming for profitability," said Connie Leung, economist at Lehman Bros. Japan.

But the acquisition and its added capacity of 1 million vehicles a year does allow Hyundai Motor to go after China, the biggest emerging car market in the world and already South Korea's second-largest auto export destination, she said.

"Whoever gets Kia was looking at one of the most profitable markets in what the World Bank has called a middle-income country," Leung said.

South Korea's top three family-run conglomerates--Hyundai, Samsung and Daewoo, which compete fiercely for market share in everything from cars and ships to electronics and construction--bid for Kia along with Ford.

The winning bid was chosen by consulting firms appointed by the creditors, who will meet in a few days to decide whether to formally accept Hyundai's bid.

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