Is Ford/Daewoo a Better Fit?

SEOUL-- Partial employee-ownership of Daewoo Motor Co. Ltd. by Daewoo employees is one of the possibilities Ford Motor Co. is studying in its current bid for the flagging No.2 Korean automaker Ford Vice Chairman Wayne Booker tells Ward's Automotive International.

Daewoo is due to be auctioned off to one of a select group of foreign bidders later this year or early next, with most observers convinced the final duel will come down to Ford vs. General Motors Corp.

Mr. Booker says employee ownership could be implemented through individual employee purchases of shares in the new company, or employees could form a consortium and purchase a major position. Ford has no objection to Daewoo creditors taking an equity position in the new company, should Ford's bid become successful. It's a way for them to share in the future of the new company and recoup some of the losses they have incurred," he says.

Ford has no plans to close any Daewoo Motor operation in Korea or to make Daewoo a smaller participant in the world markets," Mr. Booker says. "Daewoo would be one of the brands coming under the Ford global umbrella and would be developed in a similar way as Jaguar, Volvo and Mazda. Daewoo workers should know that we have no form of a slash-and-burn policy in mind. We do not want to make Daewoo smaller in the world. Our intention is to grow the new company."

Mr. Booker was in Korea to attend the first-ever Korea Import Motor Show being held last month, in which foreign manufactures were displaying their products after boycotting the country's international show last year. But Mr. Booker, as well as top executives from General Motors Corp., took the opportunity to press their case for a takeover of the ailing Daewoo Motor.

Trying to allay labor union concerns of downsizing that have sparked strikes throughout the country, Mr. Booker says Ford's relationship with Daewoo Motor would be a strategic alliance. "We will definitely retain Daewoo Motor as a company, as well as its distribution network, and we will grow that network in Korea and overseas."

Along with maintaining and developing Daewoo's supply base, Ford has no plans to downsize Daewoo's research and development center in Pupyong. Plus, Ford would transfer new technology to help improve emissions, vehicle safety, and so forth. Non-Daewoo brands would be added to the production mix but not to the detriment of Daewoo models. "We hope we can continue to produce all of the Daewoo products that exist here," Mr. Booker says, "but also add to this product list other vehicles that can be exported overseas under other trademarks."

Mr. Booker says Daewoo Motor would easily fit into Ford's global strategy, particularly in the small-car arena. "Their products can complement our other brands." It's too early to assess how all the overseas plants are performing and which ones would stay in the Ford-Daewoo fold, he says. Some are very good. For instance, the Daewoo operation in Poland is quite strong, while Ford is weak there."

Mr. Booker does not discourage rumors of a possible Ford-Hyundai Motor Co. Ltd. alliance for acquiring Daewoo Motor. "Maybe it's a lesson we learned when we bid on Kia Motors (in 1997), but until we have the exact rules for the bidding process, I'm not ruling out any approach." He quickly acknowledges, however, that Hyundai is beset by potential anti-trust problems with respect to acquiring Daewoo Motor. Hyundai holds roughly three-quarters of the Korean domestic market, and Daewoo Motor has the remaining portion.

What can Ford bring to the table that GM can't? "I'm not so sure that GM and Daewoo really have such a great relationship," he says. "After all, they did separate (in 1992, ending the 20-year joint venture with Daewoo that actually created Daewoo Motor). We can document that we have transferred technology and developed our global partners more constructively than they have."

Mr. Booker doubts that the bidding process will be completed by year end. The time is too short, given that financials for current-year operations have just been received and bidding rules have not yet been determined. Nor is there time or provision to permit the bidders to audit the latest financials. Daewoo creditors have estimated the company's liabilities at $16 billion.

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