A WSJ.COM News Roundup
SEOUL, South Korea -- Ford Motor Co. said Friday that it has decided
to pull out of talks to acquire South Korea's ailing Daewoo Motor Co.
"We believe that a proposal was not possible that would be in the best
interest of Daewoo and Ford and their respective stakeholders," Ford
Vice Chairman W. Wayne Booker said in a statement issued in Seoul.
Daewoo Motor is being sold by creditors as part of the breakup of the
Daewoo Group.
Separately, South Korea's Securities and
Futures Commission, an arm of the Fair Trade
Commission, said Friday that it has filed
false-audit charges against 41 present and
former employees of some Daewoo Group
units, including Daewoo Motor. They are
charged with violation of "outside auditing
regulations," the SFC said. Those charged
include the group's former chairman, Kim Woo
Choong. Other units involved are Daewoo Corp.
and Daewoo Heavy Industries Co.
The auditing subsidiaries of the Daewoo Group
companies were also punished, either with
suspension of their businesses for 12 months
or cancellation of licenses, the SFC said. The
total amount involved in the false auditing reached 22.9 trillion won
($20.5 billion), including 14.6 trillion won for Daewoo Corp., the SFC
said.
Hogen Oh, the chairman of the Daewoo restructuring committee, said in
a statement he regretted Ford's decision not to make a final bid and
added that the committee and Daewoo's creditors will come up with a
new plan to sell Daewoo Motor.
Lee Keun Young, chairman of South Korea's Financial Supervisory
Commission, said he expected the restructuring committee and the
creditors to decide on a new plan by Monday. He also hinted that the
two bidders who lost the June auction to Ford would have another
chance to bid for Daewoo without having to launch a new auction
procedure.
Lee added that the creditors and restructuring committee would do
their best to complete the sale of Daewoo Motor by February, a
government-set deadline.
Ford's offer was better than those of General Motors Corp., which had
formed an alliance with Fiat SpA of Italy, and another alliance between
DaimlerChrysler AG and Hyundai Motor Co. of South Korea.
Earlier this week, a General Motors spokesman said the auto maker was
still interested in re-entering the Daewoo Motor picture should Ford walk
away from a deal. But GM hasn't sent a special team to South Korea or
otherwise taken its efforts out of mothballs, the company said.
The news comes as Ford grapples with a recall of 6.5 million tires by
Bridgestone/Firestone Inc., most of which were mounted on Ford
Explorers, because of reports that the tires' treads can peel off, causing
the Explorers to roll over. The tires are allegedly linked to 88 deaths
and
more than 1,400 accidents in the U.S. over the past decade, plus at
least five more deaths since Bridgestone/Firestone began its recall Aug.
9.
Ford's top negotiators had returned from South Korea to Ford
headquarters in Dearborn, Mich. last week for internal discussions
following two weeks of talks on a final agreement with the Daewoo
restructuring committee overseeing the sale of Daewoo Motor.
There had been reports from some individuals close to Ford to the
effect that, following its two months of due-diligence review,
management wanted to reduce the company's offer for the insolvent
South Korean auto maker to "somewhere around $5.5 billion." In June,
Ford was selected to enter exclusive talks on a purchase agreement by
bidding 7.7 trillion won ($6.93 billion), according to a South Korean
government official. Ford never confirmed that figure.
But officials on both sides had insisted late last week that the parties
weren't really that far apart. A spokesman for the Daewoo restructuring
committee said that while Ford hadn't yet officially named a price,
reports indicating Ford planned to shave its bid by $2 billion or more
weren't based on fact.
Ford spokeswoman Meera Kumar declined to say whether Ford had
wanted to lower its initial bid. "It's just that after a thorough review
in
Daewoo Motor's operations abroad and here, we couldn't come up with
an offer that could satisfy both our shareholder and [Daewoo's]
creditors," Ms. Kumar said.
Ford had seen an acquisition of Daewoo as a chance to expand its
foothold in Asia's fast-growing market. But Ms. Kumar said Ford's
decision to abandon the Daewoo discussions wouldn't change the U.S.
group's overall plan to expand its operations in Asia. "The decision
hasn't made any change in our interest in Asia. We have other plans
than in Korea," she said, without elaborating.
South Korean President Kim Dae-jung had hoped that Ford's takeover
of Daewoo would boost foreign investor confidence in the South Korean
economy, which is undergoing restructuring following its recovery from
the Asian financial crisis. Daewoo Motor's troubles had been a huge
burden on South Korea's stretched financial institutions.
News of the failed Ford-Daewoo talks rattled South Korea's financial
markets. The Korea Composite Stock Price Index was down 21.94 or
3.4% at 628.20.