Hyundai Motor seeks Daimler's large car technology

August 22, 2002

Seoul -- Bloomberg news reported that Hyundai Motor Co. said it wants to expand its alliance with DaimlerChrysler AG to tap the large car and diesel engine technology of the world's fifth-biggest automaker and extend its own model range.

Hyundai Motor also wants to increase its research and development links with DaimlerChrysler, which owns 10.5 percent of South Korea's biggest carmaker, said Edward Yoon, a general manager at Hyundai's international business development team.

DaimlerChrysler, which also owns 37 percent of Mitsubishi Motors Corp., has already set up two ventures with Hyundai Motor to jointly build engines for commercial vehicles and small cars as the partners try to shave design and production costs. Hyundai Motor has little interest in co-producing small cars and instead wants to get more access to technology for larger vehicles.

"In the case of small engines, small platforms and small transmissions, I think Hyundai has great competitiveness," Yoon said in an interview. "But in the case of large-sized cars, I think Hyundai should follow DaimlerChrysler and Mitsubishi."

Yoon said the automaker is yet to start talks with the two partners on the new areas of cooperation. Hyundai Motor is discussing an accord with Mitsubishi Motors, Japan's No. 4 automaker, that will generate some payments for the Korean company and help improve its brand image. He declined to elaborate.

Hyundai Motor shares fell as much as 1.8 percent in Seoul to 35,350 won, and traded at 35,750 won as of 10:46 a.m. The shares have gained about a third this year. Mitsubishi Motors' shares rose as much as 1.4 percent to 294 yen in Tokyo. DaimlerChrysler shares rose 1.2 percent in Frankfurt yesterday to 47 euros.

Shareholdings

Efforts to expand the areas of cooperation aren't likely to result in DaimlerChrysler raising its stake in Hyundai Motor soon, Yoon said.

"DaimlerChrysler doesn't have the intention to increase the holdings at the moment," said Yoon. The current relationship "is going better and better and why should DaimlerChrysler increase (its stake)? It's enough to have good relations."

DaimlerChrysler has the option to increase its holdings in the Korean automaker to 15 percent after Jan. 1 2003. The German automaker declined to say whether there's a time limit for exercising the option.

DaimlerChrysler has yet to cast a negative vote on the Korean company's board, Yoon said. That includes voting in support of Hyundai Motor's decision earlier this month to form a venture with affiliate Kia Motors Corp., Wilh. Wilhelmsen Ltd. of Norway and Sweden's Wallenius Lines AB to take control of the auto transport business of Hyundai Merchant Marine Co. The purchase totaled $1.5 billion.

Mitsubishi Corp. also holds 2.8 percent of Hyundai Motor while Mitsubishi Motors owns 1.7 percent. Hyundai's relations with the Japanese automaker are increasing handled through DaimlerChrysler, the controlling shareholder of Mitsubishi Motors, Yoon said.

Hyundai Motor plans to be among the top five automakers by unit sales by 2010. The automaker said this week it wants to increase exports to the U.S. and Europe by about 8 percent and 7 percent, respectively, in 2003 compared with this year's targets. The growth will help counter an expected weakening of demand at home as rivals become more competitive and the effects of tax changes discourage some buyers.