Tata Motors move to buy Daewoo unit in Korea

India’s largest commercial vehicle maker Tata Motors is likely to acquire South Korea’s Daewoo Commercial Vehicle Co Ltd, which pr...

India’s largest commercial vehicle maker Tata Motors is likely to acquire South Korea’s Daewoo Commercial Vehicle Co Ltd, which produces trucks, tractors and other utility vehicles.

The Tata group, which was among ten companies expressing interest in the takeover of Daewoo’s commercial vehicle subsidiary, was given priority in sales negotiations. If the Tatas succeed in their effort, it will be first takeover by an Indian automobile company abroad. The ‘preferred bidder’ status entails Tata Motors to enter into a Memorandum of Understanding (MoU) to be negotiated with Daewoo, followed by a detailed due diligence process. “We had submitted both technical and financial bids. The final financial bid will have to be submitted after the MoU is signed and the final due diligence is completed,” according to Tata Motors director (finance) Praveen Kadle.

The company, which was founded in 1995, was incorporated under a Reorganisation Plan on November 1, 2002. “Tata Motors bidding for Daewoo Commercial is part of the company’s strategy to go global,” added the official.

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The company manufactures heavy duty trucks over eight tonnes. The company has over 93 models in cargo, dunp, mixer and tractor category. It has an annual production capacity of 20,000 units on a two-shift basis. Daewoo Commercial is currently the second-largest manufacturer of heavy commercial vehicles in Korea with a market share of around 26 per cent.

The company recently introduced the 2003 Model Year Daewoo new generation of heavy-duty trucks, according to information available on the company website.

Daewoo Commercial, spun off from bankrupt Daewoo Motor Co last year, has been under court protection. Its parent company Daewoo Motor sold most of its passenger car operations to General Motors Corp and partners last year.

Tata Motors is currently working on a new generation of commercial vehicles. As part of its international strategy, the company has recently forayed into Senegal and also provided technical assistance in setting up Senbus, a bus manufacturing unit to the Senegalese government. The company is also in the process of introducing its complete range of commercial vehicles in South Africa. Meanwhile, Daewoo Motors India, which used to produce Cielo and Matiz cars in India, continues to be in the doldrums. The company has defaulted over Rs 1,000 crore and the Serious Frauds Investigation Office is set to probe the company’s financial mess.

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Though GM of the US acquired Daewoo’s plants in other countries, India was left out. The Indian unit had accumulated huge losses and the networth has been wiped out. The company, which was declared sick, has a total debt liability of Rs 3,375 crore.

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