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GM To Buy SUV maker Ssangyong Motor ?

SEOUL, Dec 4, 2003; Judy Lee and Rhee So-eui writing for Reuters reported that General Motors Corp, eyeing a bigger presence in the high-margin sport utility vehicle sector in Asia, said on Thursday it was interested in buying South Korea's Ssangyong Motor Co.

The 55.4 percent stake in Ssangyong creditors are selling would be worth 625 billion won ($523 million) based on market prices, but a premium is likely since it is a controlling stake.

A spokesman at GM's South Korean unit said the U.S. car giant had submitted a letter of interest in buying Ssangyong, the country's smallest auto maker with a 10 percent market share, although he said GM had not definitely decided to bid.

"GM has communicated its intention to participate in the auction of Ssangyong Motor," said Rene Kreis, a spokesman for GM Daewoo Automotive & Technology Co.

At this stage, "it is just exploratory," he added, referring to the company's position.

GM took over Ssangyong's former affiliate Daewoo Motors a year ago to form GM Daewoo. In October, GM Daewoo President Nick Reilly said it was planning to broaden its product range with SUVs and larger cars, competing in segments of the market where it currently has no presence.

A potential GM bid for Ssangyong, whose Rexton, Korando and Musso SUVs as well as deluxe Chairman passenger cars are popular in South Korea, appears to fit into its growth strategy in Asia, where booming sales in China has helped the region outperform other key regions.

SUVs and large cars are two of the fastest-growing segments in the South Korean market, and currently account for about a 30 percent share of industry sales.

"Ssangyong is an attractive acquisition target because its leading position in the high-return SUV market keeps it profitable even given the country's economic hardships while the support of creditors has strengthened finances," said Chae Kyoung-sup, an analyst at Shingyong Securities Co.

The market took news of GM's interest seriously, with Ssangyong shares soaring more than five percent to close at a new year high of 9,840 won following the news.


If GM submits a formal buyout proposal, it is pitting itself against around 10 other potential buyers.

Local media have said Shanghai Huizhong Automotive, a unit of Shanghai Automotive Industry Corp, is another prominent candidate. French car maker Renault was also tipped by media as a contender, but the company denied this week reports that it had submitted a letter of interest.

GM and Shanghai Automotive are both shareholders of the unlisted GM Daewoo, South Korea's third-largest auto maker.

GM has a 45 percent stake, Suzuki Motor Corp has a 15 percent stake, while China's No. 2 auto maker Shanghai Automotive and creditors own the rest of GM Daewoo.

Ssangyong, which has been undergoing creditor-led debt restructuring, was rescued by creditors and spun off from the now defunct Daewoo Group in late 1999.

Chae said the creditors' sale of Ssangyong should proceed as quickly as possible.

"The company needs fresh capital to develop new models and better position itself against new foreign and domestic entrants in the SUV market next year."

Ssangyong Motor has the capacity to produce 180,000 vehicles a year with a 7,500 workforce.

Combined output at South Korean auto makers is expected to hit a record 3.31 million units next year, up 8.4 percent from this year's estimate, according to the Korea Automobile Manufacturers' Association.