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