GE Capital to Buy Hyundai Capital Stake

SEOUL August 1, 2004; Lee Bong-hyun and Jean Yoon writing for Reuters reported that GE Capital, a unit of General Electric Capital Corp., agreed on Monday to buy a stake in Hyundai Motor Co.'s ailing financial arm for $371 million, making inroads into South Korea's $8.6 billion auto financing market.

Hyundai Capital Services Inc., 84 percent owned by top South Korean car maker Hyundai Motor, said the U.S. company would invest a total of 1 trillion won ($859 million) in the auto finance and lease firm by 2006.

The investment into Hyundai Capital cuts Hyundai Motor's exposure to the unit, which suffered a net loss of 187.3 billion won last year. It also helps bolster Hyundai Capital's financial structure and bring in financial expertise.

Hyundai Capital said in a statement GE Capital would pay 432 billion won for a 38 percent stake, or 16,000 won per share, with an option to buy an additional 5 percent in 2006.

"By attracting a sizable foreign investment through this alliance, we will be able to raise out global credibility, lower borrowing rates and become a global financing company," the statement said.

Eyeing a presence in the growing auto finance and lease market, GMAC, a financial unit of General Motors, and unlisted Samsung Card have agreed to set up a joint venture with 20 billion won in capital.

As well as the auto-finance arm, Hyundai has a credit card firm.