The official auctions for Daewoo Motor Co. and Samsung Motors Corp. haven't begun, but prospective bidders are jostling for a chance to gain a foothold in Korea.
The result promises to be a major shift in what has been Asia's second-largest car market. Daewoo is Korea's No. 2 carmaker with roughly a 25 percent share of the local car market.
'In the end, it won't matter which foreign automaker takes over Daewoo Motor. The end result of the bidding would put the remaining domestic players, particularly Hyundai, on the defensive,' said Jason Kim, auto analyst for SG Securities in Seoul.
Paul Drenkow, Ford Motor Co.'s chief of Asian operations, led a delegation to Seoul last week to state formally the U.S. carmaker's interest in Daewoo.
Ford entered the bidding as Korea Development Bank, Daewoo's main creditor, and the Korean government rejected General Motors' request to extend its exclusive negotiating rights for the troubled Korean company.
They are betting that an open auction will fetch a better price for Daewoo.
REPORT OF GM OFFER
Yonhap, the national news agency, has reported GM has offered $6.4 billion for Daewoo contingent on Daewoo's debt being written off. Daewoo Motor's debt has been reported to total about 18.6 trillion won, or $15.7 billion at current exchange rates. Its assets have been valued at 12.9 trillion won, but most analysts call the figure inflated.
Daewoo's creditor banks set the end of January as the deadline for the submission of letters of intent, and mid-March as the deadline for picking a 'priority negotiator.' They hope to cement the deal by June.
Ford has brought in reinforcements: Ulrich Bez, a former Porsche and BMW engineer who was Daewoo's vice president of engineering from 1993-98. Bez is working with Ford as an advisor.
RENAULT EYES SAMSUNG
Meanwhile, France's Renault SA disclosed last week that it had begun exclusive negotiations to acquire a stake in Samsung Motors Corp. Samsung has been virtually shut down since it went bankrupt last year.
In many ways, Samsung Motors is a logical fit for Renault, which last year bought 36.8 percent of Japan's Nissan Motor Co.
Samsung's automaking technology is licensed from Nissan, and its sole assembly plant, in Pusan, is a virtual clone of Nissan's factory in Kyushu, Japan. It built a model based on the Nissan Maxima until it halted operations.
During a press conference at its Paris headquarters, Renault said it expects the negotiations to be wrapped up within two or three months.
The likely sale of the two automakers to foreign interests has touched a nerve in Korea, prompting heated debates and sharp divisions over the merits of keepjing a 'Korean' automotive industry.
In the nationalist perspective, the sale of Daewoo to foreign interests is the death knell for the Korean auto industry, which is seen here as one of the crowning achievements of government-led industrial planning during the 1970s and 1980s.
'We're worried about shrinkage in production and in r&d,' said Chung Tae-Sung, managing director of the Federation of Korean Industries.