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Problems May Loom if DaimlerChrysler/Hyundai Purchases Daewoo, According to CSM Worldwide

28 June 2000

Problems May Loom if DaimlerChrysler/Hyundai Purchases Daewoo, According to CSM Worldwide

    NORTHVILLE, Mich. - Although the anticipated DaimlerChrysler/Hyundai 
purchase of Daewoo Motor Company looks good from the automakers' ivory-tower, 
top-down view, many major obstacles become apparent when examined from the 
bottom up.  That's exactly the way Michael Robinet, director of forecast 
services, and others at CSM Worldwide begin their analyses of automotive 
industry developments.

    Integration issues

    The integration issues that would accompany the Daewoo purchase should not
be underestimated.  "It will take several years to gain limited benefits
relative to platform and component sharing from the DaimlerChrysler merger
itself," says Robinet.  "Further, with the addition of Mitsubishi and Hyundai
to their growing family and the possible purchase of Daewoo, integration will
be years off, making cost sharing and economies of scale a very distant
reality."

    Possible monopoly

    Another major problem with the Daewoo acquisition by the
DaimlerChrysler/Hyundai consortium is the possible establishment of a
monopoly, according to Masaki Taketani, Asian forecast manager.  "With Daewoo,
Hyundai and the DaimlerChrysler/Hyundai consortium would control over 95
percent of Korea's light-vehicle market."

    Bidding war projected

    Additionally, such a purchase is difficult because General Motors, through
the GM/Fiat consortium, is resolute in bringing Daewoo into its fold.  "A
bidding war between GM, DaimlerChrysler and Ford is going to be the inevitable
result," according to Taketani.

    There are several reasons for prompting such a war, he says.  "We are
predicting 24 percent growth in light-vehicle output by 2005 in Korea.  Daewoo
has the capacity to produce 2 million vehicles through all its operations in
Eastern Europe and in Korea."

    "The winning bidder for Daewoo is seeking to essentially complete their
Asian strategy for B- and C-segment offerings," adds Robinet.  "That's because
Daewoo has a foothold in Eastern Europe, including Romania, Poland and Russia.
Although the economy in Eastern Europe is presently in recession, Daewoo's new
partner will be ready when the economy turns around."

    CSM Worldwide supports more than 200 automotive suppliers with the global
market intelligence and forecasting services.  Headquartered in Northville,
Mich. (Detroit), CSM Worldwide covers the global automotive environment from
offices and affiliates in London, Prague, Sao Paulo, Tokyo, Beijing and
Shanghai.