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    Acquisition and Merger of Kia Motors by Hundai Motors Rev 1.0

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    Tejaswi Monangi
    The document summarizes Hyundai Motors' acquisition and restructuring of Kia Motors in the late 1990s. It describes the global automobile trends of the mid-1990s that led many automakers to pursue mergers and acquisitions. It provides background on the struggling Korean automobile industry and Kia Motors' bankruptcy in 1997 due to overinvestment and weak market performance. Hyundai Motors sought to acquire Kia Motors to achieve economies of scale, integrate operations, and improve competitiveness. The restructuring plan involved debt restructuring, integrating management and business divisions, and overcoming organizational challenges to achieve synergies between the companies. The outcome was Kia Motors returning to profitability in 1999 with doubled sales from the previous year and

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    Acquisition and Merger of Kia Motors by Hundai Motors Rev 1.0

    Uploaded by

    Tejaswi Monangi
    333 views13 pages
    The document summarizes Hyundai Motors' acquisition and restructuring of Kia Motors in the late 1990s. It describes the global automobile trends of the mid-1990s that led many automakers to pursue mergers and acquisitions. It provides background on the struggling Korean automobile industry and Kia Motors' bankruptcy in 1997 due to overinvestment and weak market performance. Hyundai Motors sought to acquire Kia Motors to achieve economies of scale, integrate operations, and improve competitiveness. The restructuring plan involved debt restructuring, integrating management and business divisions, and overcoming organizational challenges to achieve synergies between the companies. The outcome was Kia Motors returning to profitability in 1999 with doubled sales from the previous year and

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    The document summarizes Hyundai Motors' acquisition and restructuring of Kia Motors in the late 1990s. It describes the global automobile trends of the mid-1990s that led many automakers to pursue mergers and acquisitions. It provides background on the struggling Korean automobile industry and Kia Motors' bankruptcy in 1997 due to overinvestment and weak market performance. Hyundai Motors sought to acquire Kia Motors to achieve economies of scale, integrate operations, and improve competitiveness. The restructuring plan involved debt restructuring, integrating management and business divisions, and overcoming organizational challenges to achieve synergies between the companies. The outcome was Kia Motors returning to profitability in 1999 with doubled sales from the previous year and

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    333 views13 pages

    Acquisition and Merger of Kia Motors by Hundai Motors Rev 1.0

    Uploaded by

    Tejaswi Monangi
    The document summarizes Hyundai Motors' acquisition and restructuring of Kia Motors in the late 1990s. It describes the global automobile trends of the mid-1990s that led many automakers to pursue mergers and acquisitions. It provides background on the struggling Korean automobile industry and Kia Motors' bankruptcy in 1997 due to overinvestment and weak market performance. Hyundai Motors sought to acquire Kia Motors to achieve economies of scale, integrate operations, and improve competitiveness. The restructuring plan involved debt restructuring, integrating management and business divisions, and overcoming organizational challenges to achieve synergies between the companies. The outcome was Kia Motors returning to profitability in 1999 with doubled sales from the previous year and

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    Acquisition and

    Restructuring of Kia
    Motors by Hyundai
    Motors
    Akhlendra Solanki – 1807001
    Prateek Lakhera – 1807005
    Suraj Kishan Das – 1807008
    Siddharth Dhall – 1807009
    Tejaswi Monangi - 1807010
    Global Automobile Trends - Mid 90’s
     Global oversupply and production capacity well in excess of
    demand.
     Market expanded due to dramatic advances in Information
    Technology as well as market openings due to WTO
    frameworks resulting in :
    A. Globalization of supply.
    B. Diversification of customer preferences.
    C. Shortening of production cycles.
     Shifting customer preferences resulted in:
    I. Increased demand for product safety.
    II. Increased demand for environment friendly automobiles.
    III. Increased R&D costs.
    Global Automobile Trends - Mid 90’s
     In response to these market stimuli, the automobile companies
    responded by,
    A. Increasing production efficiencies.
    B. Strategic alliances to realize economies of scale and scope.
    C. Mergers & Acquisitions to improve global competitiveness.

     Such M&As are aimed for better synergy effects among companies with complementary sales
    regions and automobile types.
     For example, if we observe merger between Daimler – Benz and Chrysler in 1998,

    Company Daimler Benz Chrysler


    Strong Market Europe North America
    Multipurpose Small &
    Strong Segment Luxury Class
    Medium Class
    Korean Automobile Industry – 1990s

     Since Mid 1990s, Korean automobile industry is characterized by


    weak domestic demand and continuous over supply.
     During 1997, only 67% capacity is utilized 2.85 Million cars produced
    per annum against available production capacity of 3.95 Million
    cars.
     Korean firms were having following issues w.r.t US counterparts,
    1. Price competitive.
    2. Unsatisfactory product quality.
    3. Dearth of local sales networks and finance.
     Asian financial crisis of 1997, Korea’s automobile industry went through a
    vicious cycle of weak domestic demand reduced production and
    excess equipment.
    Kia Motors – Causality of Asian
    Financial Crisis 1997.
    Kia Motors declared bankruptcy in 1997 due to ,
    A. Heavy investment in small and large utility vehicles.
    B. Weak market performance of Sephia, Credos, Avella.
    C. Ineffective management and overinvestment in Kia Special steel.
    D. Role as payment guarantee to Kisan, an affiliated construction
    company.
    Power Game behind KIA Acquisition
    Governments/Creditors
    Wants third party acquisition

    Daewoo, Hyundai
    Ford Wants to resist acquisition by Samsung
    Wants to enter new markets

    Kia
    Motors

    Samsung Opposition Party/ Civic groups


    Hoping for restructuring of Kia and emerge Arguing Kia should stand on own to avoid
    as the market leader monopoly
    Hyundai’s View Point towards Kia Acquisition
     Aimed for 2 Million cars per annum by 2000.
     Acquiring Kia would increase capacity by 2.6 Million cars per annum thus displacing Honda
    (2.4 Million cars per annum)
     Become 10th Largest automobile manufacturer in the world.
     Attain potential benefits of,
    1. Economies of scale.
    2. Economies of scope.
    3. Global marketing network.
     Improve competitiveness by,
    1. Allowing use of common parts.
    2. Integrated quality control.
    3. Shared functional improvements (R&D).
    4. Cost reduction due to bulk procurement.
     Acquiring new segments of minivans and commercial vehicles and new models of Carnival
    and Rio.
    Restructuring of Kia Motors - Challenges

     Maximizing synergy effects by integrating Kia’s automobile division to strengthen


    international power of integrated firms business.
     Corporate Restructuring Plan : Debt restructuring of Kia motor’s debts.
     Integration of Management : Integrating management of both companies.
     Integration of Business Division : Restructuring of group subsidiaries and affiliates.
     Organizational Challenges : Creating synergy between structures of both firms.
     Platform Integration : Avoiding overlaps between product lines.
     Downsizing of overlapping workforces : Reduction of unwanted manpower.
     Integration of organizational cultures : Employee exchange programs.
     The daily ordering system: To reduce work in progress inventory.
     Promotion of commercial vehicle division as a separate corporation : for clear
    segmentation and positioning.
    Corporate Restructuring Plan
     Debt restructuring of KIA motors resulted in Waiver of 7
    trillion KRW.
     Acquiring 51 % share of KIA and affiliate companies by
    paying 1.2 trillion KRW in debt.
     Reduce debt rate by 200% by inducing foreign equity.
    Integration of Management

    Se Young Chung
    Chairman, Hyundai and Kia
    Mong Gu Chung
    CEO, Hyundai and Kia
    Mong Guy Chung
    COO, Hyundai and Kia

    President, Hyundai President, KIA

    Vice President, Hyundai Vice President, KIA


    Integration of Business Division

    A/S Division
    Hyundai Kia Domestic
    Domestic Sales Sales Division
    Division

    A/S General
    A/S Department Planning Team A/S Department
    Department

    Sales Planning Service Parts Service Parts


    Team Operation Information
    Team team
    Outcome of Restructuring
     Kia motors was back in black in 1999 with profits of KRW 135.7
    billion – the highest profits in the company’s existence.
     Sales were double of 1998: 820,000 vehicles of which 350,000
    were domestic and 470,000 were export sales.
     Debt ratio reduced from 800% to 148% by 1999.
     Legal management of KIA motors ended in 1999.
     Sold a total of 1,225,000 new vehicles, an increase of 72% over
    previous year.
     Overseas sales rocketed up to 469,000 an increase of 53% over
    previous year.
    Thank You

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