SEOUL - A few more knots are likely to tighten before those now pulling the strings can untangle the mess at Kia Motors Corp.

The recent resignation by Chairman Kim Sun-Hong eliminated one hurdle in the South Korea government's effort to reform the company, but several obstacles remain, including what could become a nasty battle with Kia's unions over the automaker's future.

Mr. Kim's resignation is likely to be the first domino in a top management restructuring that is expected to follow the state-owned Korea Development Bank's (KDB) takeover of Kia. Replacing Mr. Kim at the top is South Korea's finance minister, an appointment some Kia officials say signals the government will take its time - perhaps up to a year - to decide the company's fate.

In October, the South Korean government ended months of fence-sitting over the fate of Kia, announcing it would allow the KDB to convert some 300 billion won ($327.8 million) in loans to equity. The move would make the KDB Kia's biggest shareholder with about 30% of the automaker and allow it to apply to Korean courts for receivership. Currently, Ford Motor Co. is Kia's biggest shareholder with about a 9.39% stake (plus Ford affiliate Mazda Motor Corp.'s 7.52% stake). Ford is lobbying to prevent a takeover by the KDB, saying it wants to see Kia remain independent. However, its holding in Kia prohibits it from taking an active role in management.

Mr. Kim, who had fought to retain control of the automaker, apologized "for causing big trouble to the government, the people and Kia families," but he added that he believes "receivership is inappropriate for a carmaker whose stage is the world." And although he encouraged the union to end its walkout against the carmaker, the union ended its 13-day strike only after the government promised it would invest in Kia.

Still, a takeover by a third party is the likely scenario, with Samsung and Daewoo emerging as likely candidates.

"When Kia's operations are normalized, it will be desirable for a third party to take over Kia rather than KDB holding on to it," Deputy Prime Minister Kang Kyung-Shik said prior to the walkout by workers. Mr. Kang said the first move will be to sell off subsidiary Asia Motors Corp., maker of the Rocsta sport/utility vehicle. Asia, with one plant in Korea and another in Brazil, is the piece of Kia eyed by Daewoo.

"We have reviewed Asia Motors," says Lee Sung-Sang, director-strategic planning for Daewoo Motors. "Daewoo doesn't have (small and medium trucks and buses), so it would fill a gap in our array. However, it is not easy to take over, because there are many, many problems to face. The banks, the owners of Kia, the owners of Asia Motors are all special interest groups with different ideas."

Mr. Lee admits the automaker's strong labor union would present a major problem. "If we move to take over (Asia) the labor union will try to prevent it," he says. "If we take over, we must have a cooperative labor union. We might have to de-organize the existing union."

Speculation long has been that Samsung, the latest entry into the Korean auto industry, would acquire Kia. Samsung, through subsidiaries Samsung Life Insurance Co. and Samsung Fire & Marine Insurance Co. Ltd., currently holds nearly 6% of Kia's stock on a "pure fund-managing" basis. An earlier attempt by Samsung to acquire Kia was rebuffed by the government.

While Samsung officials say they are "always open to discussions for any kind of cooperation," they contend the company currently lacks the necessary resources for the acquisition. "We have no interest in acquiring Kia," says a Samsung spokesman. "The rumors are untrue."

However, Daewoo's Mr. Lee, considered a veteran analyst and strategist, says Samsung needs Kia. Samsung paid far too much for its Shinho, Pusan, site, he says, then had to invest heavily to shore up the area. It also had to pay a bundle to acquire technology from Japan's Nissan Motor Co. Ltd., purchase tooling and train workers, Mr. Lee points out. And because many suppliers were afraid that doing business with Samsung would cost them contracts at other automakers, Samsung has had to develop and produce many major parts in-house.

All of this will make it difficult for Kia to earn money on the 240,000 cars it expects to build annually, Mr. Lee says. Plans call for doubling annual capacity to 500,000. And while this would give Samsung the economies of scale it needs, it also will hike its cost burden unless that entire capacity is sold out, Mr. Lee points out.

"Samsung has a dilemma," Mr. Lee says. "To expand their present new facility is not good. To maintain low capacity is not good. There is no way for them to be successful without Kia.

"They have no customer base," he adds. "They will sell 80,000 cars in their first year of production to their employees. They have only 160,000 employees to sell to."