Shanghai Automotive Industry Corp (SAIC), the joint venture partner in China of both General Motors and Volkswagen, has been chosen as the preferred bidder for troubled South Korean automaker Ssangyong Motor, SAIC announced on Friday, July 23.
SAIC president Hu Maoyuan and Chohung Bank governor Choi Dong-Soo will sign a memorandum of understanding in Seoul on Tuesday, July 27, confirming that they have agreed on a price for the 48.9 percent stake, said an official with Samil PwC, Ssangyong's financial advisor,. He declined to name the price. Chohung Bank is Ssangyong's main creditor.
Ssangyong's creditors hope to reach a final agreement by late September and get the payment from SAIC by October.
The purchase will be a step towards realizing SAIC's goal of being a multinational automotive manufacturer.
"What separates global carmakers from wannabes is ability to design and engineer your own cars. Ssangyong has engineers in place doing this," said Michael Dunne, president of Shanghai-based consultancy Automotive Resources Asia.
"This is the final piece of the puzzle to be put into place," he said. "SAIC (already) has the supply and distribution capabilities, and the manufacturing know how."
Buying Ssangyong would round out SAIC's product lineup. Ssangyong designs and manufacturers its own line of SUVs. It also produces light commercial vehicles using technology acquired from Mercedes in the early 1990's.
SAIC is China's largest passenger carmaker through its joint ventures. The Chinese automaker also aims to make 50,000 SAIC-badged vehicles by 2007.
Officials from China's National Development and Reform Commission will attend Tuesday's signing ceremony, indicating the deal has the Chinese government's stamp of approval.
In April, chemical company China National Bluestar Group was named as the preferred bidder by Ssangyong creditors. But it did not get final approval from the Chinese government, and SAIC stepped to the forefront.
This will be SAIC's second investment into a foreign automaker. In 2002, it bought 10 percent of GM Daewoo Automotive Technology Co.