France's Renault SA announced on Thursday it will invest 300 million dollars over the next five years in its newly acquired Samsung Motors Inc.
"We plan to invest 300 million dollars between 2000 and 2004," the French auto giant said in a statement.
The announcement came after Renault, South Korea's Samsung Group and creditor banks of Samsung Motors inked a deal in this southeastern port to launch a new Renault-controlled joint firm to run Samsung Motors.
Renault will become the first foreign firm to control an auto firm in South Korea, the second largest auto market in Asia.
"Early July, we should be in a position to start management of the new company," Renault executive vice president Georges Douin said at a news conference.
Douin said Renault will keep producing Samsung Motor's SQ5 sedan model. Another Renault official said the French firm will also bring a new model of its own to South Korea.
Douin signed two contracts, one with Samsung Group's Samsung Capital Co. Ltd. and Samsung Card Co. Ltd to launch the joint venture and the other with creditors to acquire Samsung Motors' assets.
Under the deal, Renault owns 70.1 percent of the joint firm, the two Samsung Group subsidiaries 19.9 percent and Samsung Motors' creditors the remaining 10 percent.
Renault said the new company will buy Samsung Motors' assets for 615 billion won (560 million dollars), slightly less than the 620 billion won earlier announced by creditors.
"The new joint firm will pay 110 billion won in cash upfront while the creditors will swap another 44 billion won of Samsung Motors' debt for shares in the venture firm," it said in a statement.
"Half of the remaining 461 billion won will be paid in installments over 10 years beginning 2004 and the other half will be paid back gradually to the creditors from the firm's earnings each year."
Renault's Douin said earlier he hoped that his company would secure 15 percent of South Korea's auto market through the joint venture. South Korea's domestic car sales are expected to climb to 1.5 million units this year.
"Renault is aiming, under the Samsung brand, for sales of 150,000 to 200,000 vehicles by 2005," in South Korea, he said.
Production at Samsung Motors would reach annual capacity of 240,000 units "in a few years time", he added.
Samsung Motors was launched in March 1998, in the midst of the Asian economic crisis and was placed in receivership last July with 4.3 trillion won (3.9 billion dollars) in debt.
Renault's entry into South Korea could challenge the biggest player Hyundai Motor Co.
"Renault can threaten Hyundai Motor's No.1 status here," said auto analyst Sohn Jong-Won of Ssangyong securities in Seoul.
"But the prices of SM5 sedans' have to come down to compete with Hyundai's same-class Sonata model."
The Renault-Samsung deal is part of the French auto giant's ambition to expand in the fast-growing Asian auto market, said Kim So-Rim of the Korea Automobile Manufacturers' Association in Seoul.
A year ago, Renault secured a controlling 36.8 percent stake in Japan's Nissan Motor Co. Ltd. which has helped Samsung Motors to build the SM5, which is derived from the Japanese maker's Maxima model.
The French group announced on Tuesday a deal with Volvo to become the leading shareholder in the Swedish firm by acquiring a 20 percent stake in exchange for transferring the RVI heavy trucks subsidiary -- PUSAN, South Korea (AFP).
© 2000 Al Bawaba (www.albawaba.com)
