SEOUL - For Renault, winning control of Samsung Motors after a difficult round of negotiations was the easy part. Rescuing the struggling Korean company and putting it back to work is the tough bit of the job.
Samsung Motors, set up only four years ago at a cost of some $5 billion, is in deep trouble. Among the immediate problems facing Renault include:
Finding and hiring new production workers. Two-thirds of the company's 6,000 employees have left, including the core of the r&d center. Only 1,500 production workers remain and they are bitter, demoralized and anxious.
Generating stock. Production at the $2.5 billion greenfield plant in Pusan, which has a nominal capacity of 240,000 units a year, plunged to 13,700 last year, from 41,600 in the peak year of 1998.
Rebuilding the collapsed sales network. As market share has slid from 4 percent in 1998 to less than 1 percent this year, the retail base has gone down to 33 outlets, from 88. Of those stores that nominally remain open, most are effectively closed, deserted by staff and customers alike.
One thing remains in Renault's favor: Samsung's production processes, parts and components come from Nissan Motor Co., which Renault now controls. Indeed, Samsung's core model, the SM5, is a reworked Nissan Maxima, and the Pusan plant itself is built around Nissan's flexible production system.
Renault has promised that it will expand Samsung's production and add up to three or four models by 2005, according to a spokesman for the French automaker. But he would not confirm speculation that the Renault Megane and its compact minivan offspring, the Scenic, would be added to the Samsung lineup.
'We've not yet fixed our product plans,' the spokesman said. 'But it will have to be done carefully to remain competitive. Our goal is to reach 10 to 15 percent of the local market by 2005.'
Company officials declined to comment on export possibilities. Samsung has commitments to distributors in South America and the Middle East, but exports never exceeded minimal levels. With its lower manufacturing costs, Korea could serve Renault as a base for competitively priced cars and components.
Under terms of the letter of intent signed late last month, Renault agreed to purchase a 70.1 percent stake in Samsung for $562 million plus the assumption of about $210 million in debt. Many analysts consider the deal to be extremely good value for Renault - a sentiment echoed by the lead creditor, Hanvit Bank.
'We are not totally happy about the deal, but we have no other choice,' a senior Hanvit executive said last week. 'But any further delay will only produce successive bankruptcies for parts suppliers.'
The deal does not include a truck plant in Taegu, which manufactures heavy-duty trucks under license from Nissan Diesel. Analysts are speculating that once the car plant deal is concluded, Renault may turn its attention to taking over the truck plant as well.
The buyout will give Renault a major advantage in the race by European automakers to grab a slice of the Korean market. Korean automakers sell more cars in Europe each day than all importers sell in Korea each year. The Korean government has continually promised to open up its domestic market in the past.