The future of Samsung Group's ill-fated car venture remains up in the air after a decision to seek court protection from creditors.
Last week, South Korea's Sam-sung Motors Inc. said it would file for court receivership, scuttling a government-orchestrated deal that would have had Daewoo Group swap its electronics business in exchange for the young automaker.
'The clear objective of seeking court receivership is to put our company on the path to recovery,' Samsung Motor Vice Chairman Lee Dae-Won told the Economic Daily. 'We still think it's possible to establish a joint venture with other companies.'
Early last year, Samsung and Ford Motor Co. discussed Ford taking an equity stake in Samsung. But Ford, as did Daewoo, balked at Samsung's total liabilities of 4.3 trillion won, or about $3.7 billion at current exchange rates.
Despite six months of negotiations and government prodding, the companies failed to complete the deal. Daewoo was holding out for an unspecified amount of 'deal sweeteners' - cash and purchases of Daewoo convertible bonds.
Samsung's Pusan car plant, which manufactures a local version of the Nissan Cefiro, is geared up to make 250,000 units annually. It is producing at about one-tenth that rate because of sluggish sales and work stoppages because of job security.
'Barring a significant cash injection and bond purchase, there was nothing advantageous for Daewoo to take over Samsung,' said Han Kum-Hee, Merrill Lynch's auto industry analyst. 'Daewoo has enough financial problems of its own.'
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Lim Dong-Soo, an analyst for Jardine Fleming Securities, could not rule out the possibility of liquidation. But, 'a more probable scenario is that Daewoo will eventually take over Samsung after the 4.3 trillion won in debts is written off.'
The aborted Samsung takeover deal will likely reopen the door for renewed partnership negotiations between Daewoo Motor Co. Ltd. and General Motors. The two have been in on-and-off talks in an effort to re-establish a joint venture they terminated in 1992.
Also last week, 50 Daewoo executives submitted their resignations. The company accepted 33 of them and kept 17 executives on for a year. They have agreed to work without pay.
One of those was Kim Tae-Gu, the former head of Daewoo Motor. Because of his knowledge of the industry, his move back to the auto-making side is seen as a positive sign for the company.