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Hyundai to Sever Ties with German Carmaker

DaimlerChrysler's woes in the Asian market deepened with South Korean partner Hyundai Motors planning to scrap a joint truck venture. Earlier Daimler abandoned beleaguered Japanese partner Mitsubishi Motors Corp.


DaimlerChrysler's Asian strategy needs tinkering too.

The South Korean carmaker Hyundai Motors is planning to drop all cooperation projects with German carmaker DaimlerChrysler in the coming week, according to media reports. The move would affect a major planned alliance between DaimlerChrysler and Hyundai Motors to jointly build heavy trucks and the yearly delivery of 50,000 truck engines to Hyundai.

Quoting company sources, Germany's Wirtschaftswoche financial news magazine said profitable Hyundai had cold feet amid worries that DaimlerChrysler, the world's fifth-biggest automaker, would use the deal to seek greater influence over Hyundi, as is currently happening to the troubled Japanese automotive group Mitsubishi Motors.

DaimlerChrysler' Finance Director Manfred Gentz earlier said that all cooperations with Hyundai would continue as planned, but added that the strategic urgency of the joint trucking venture with Hyundai was no longer as significant as when the two joined forces in 2001.

Mercedes-Benz Chinese plans angers Hyundai

Mercedes-Benz E-Klasse

A Mercedes-Benz E-Class car

According to media reports, Hyundai chief Park Hwang-Ho is irked at the Chinese expansion plans of Mercedes-Benz, a subsidiary of DaimlerChrsyler. Starting 2005, Mercedes together with Chinese manufacturer Beijing Automotive Industry Company (BAIC) wants to produce Mercedes C-class and E-class (photo) models for the Chinese market.

But since Hyundai itself has a cooperation with BAIC, it insists that BAIC deal exclusively with it for 30 years. Experts believe that if the South Koreans get their way, Mercedes-Benz will be no longer be able to begin car production in China. DaimlerChrysler has an investment stake of just more than 10 percent in Hyundai Motors, which is part of the Hyundai Industrial Group.

DaimlerChrsyler to review Asian strategy

Kim Yong-Duk, vice president of KEB Commerz Investment Trust Management in Seoul, told the Wirtschaftswoche that Hyundai did not want to become "just another element in the shaky World Inc. of Herr Schrempp [DaimlerChrysler chief executive Juergen Schrempp] but rise to the top by its own efforts".

The magazine said a separate project to jointly manufacture truck engines was also unlikely to be carried out, but the two groups would persist in plans to make car engines together.

Though DaimlerChrysler has not categorically confirmed the end of the joint trucking venture with Hyundai, the negotiations which have dragged on for the past one and a half years, have reportedly been difficult. Gentz said DaimlerChrysler would fundamentally review its Asian strategy.

DaimlerChrsyler abandons Mitsubishi Motors

Mitsubishi in Schaufenster in Japan

The headquarters of Mitsubishi Motors Corp. in Tokyo

On Friday, DaimlerChrysler company executives announced they had abandoned plans to rescue ailing carmaker Mitsubishi with a multi-billion-dollar investment.

Daimler shares rose as investors expressed relief as what appeared to be the end of the of its costly entanglement with Japan's only unprofitable carmaker. But the decision came as a blow to DaimlerChrysler CEO Jürgen Schrempp's vision to turn the company into a worldwide player.

After the 1998 merger with Chrysler, Schrempp had bought 37 percent of the Japanese company three years ago, making DaimlerChrysler Mitsubishi's largest shareholder. Mitsubishi is expecting a 72 billion yen (€557.8 million, $659.4 million) loss for the fiscal year ending March 31.

DaimlerChrysler officials on Friday said injecting more money into Mitsubishi made no sense for them, saying it would require a "very, very high capital infusion." They added that they didn't know yet what they would do with their shares.

"There is no decision for selling out stake and we are not looking for someone to buy it," DaimlerChrysler Chief Financial Officer Manfred Gentz said, according to AP news agency. In response, the Mitsubishi group of companies, which holds the majority of Mitsubishi Motor shares, announced that it would "do their best" to revive the car maker.

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