Kia Motors Going on Auction Block
Troubled Kia Motors Corp., South Korea’s third-largest car maker, will be offered to the high bidder in an international silent auction that starts next week, its chief creditor said Monday. Ford Motor Co. is seen as a likely bidder.
Separately, two former top Kia executives were arrested Monday in South Korea on charges of altering the car maker’s books to help it obtain desperately needed bank loans from 1995 until its bankruptcy filing last year.
Kia, which sells cars in 90 nations including the United States, owes nearly $1 billion to the Korea Development Bank alone. Its $6.4 billion in total liabilities outstrips its assets by $800 million. A sister company, Asia Motors Co., has a net deficit of $1.2 billion.
The state-run development bank has been trying to sell Kia to Ford, which, in partnership with its Mazda Motors Corp. affiliate, already owns a 16.9% stake in the company.
In an interview Thursday--before the competitive auction was announced--Kia’s U.S. president, W.K. Kim, said a deal with Ford was “highly probable.”
The auction may have come about because the Korea Development Bank wants to sell both companies in a single deal and Ford balked at purchasing Asia Motors, sources said. Still, Ford so far is the only company that has examined Kia’s books and inspected its assets, insiders say.
South Korea’s two largest car makers, Hyundai Motor Co. and Daewoo Motor Co., have said they intend to form a joint venture to bid on Kia, but some observers believe they have been hurt by the South Korean economic collapse and are unlikely to have the cash to make a winning bid. Additionally, some industry watchers say, the South Korean government would oppose such a deal because it would create a near-monopoly.
The move to sell Kia is part of South Korea’s economic restructuring under the terms of a $58-billion bailout from the International Monetary Fund.
Kia’s U.S. executives were unavailable for comment Monday, but in the past they have routinely said they believe Kia will survive as a separate brand regardless of who eventually ends up owning it. Although not a major player in the U.S., Irvine-based Kia Motors of America Inc. has been growing steadily since it began sales in 1994. It now has 420 dealerships in 41 states and expects to have dealers in all 48 contiguous states by the end of the year.
Kim said last week that U.S. sales of Kia’s economically priced Sephia passenger cars and Sportage sport-utility vehicles should top 90,000 this year. The company sold 40,521 vehicles in the U.S. through June.
In South Korea, development bank officials said they will launch the international auction with a call for bids on July 15. The bank said it will choose the successful bidder by the end of August.
The company’s problems at home have not helped it win support from the government.
Prosecutors charged Monday that Park Jae-hyuk, a former Kia president, and his deputy, Han Seung-joon, obtained $1.29 billion in loans from several banks, using altered documents to show that the auto company was profitable while it actually had been losing money since 1991.
And former Kia Chairman Kim Sun-hong was arrested in May on charges of embezzling $37 million from the company. The government charged that he used some of the money to bribe politicians so he could take out bank loans and keep Kia afloat.
