Hyundai has confirmed it is in talks to restructure its partnership with DaimlerChrysler.
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DaimlerChrysler’s strategy to enlarge its presence in Asia could be threatened by the uncertain future of its partnership with South Korean automaker Hyundai. This latest development comes on top of the well-documented collapse of its Mitsubishi partnership, leaving DaimlerChrysler in a vulnerable position in this booming automotive market.
It has been a torrid week for Stuttgart-based auto manufacturer DaimlerChrysler. After finally deciding not to go ahead with its much-vaunted bale out of Mitsubishi Motors, reports now suggest it is discussing the restructuring of its partnership with Hyundai. A spokesman for the South Korean manufacturer told the Houston Chronicle on Tuesday that it was “holding talks with DaimlerChrysler to redefine our partnership to an alliance that would be limited to individual projects”.
Relations between the two partners have deteriorated due to problems over joint ventures with a number of Chinese manufacturers. DaimlerChrysler bought 10% of Hyundai in 2000 in order to increase its share of the Asian market. Although a break-up of the alliance would enable the German group to sell its stake for around $865 million, it would severely jeopardize DaimlerChrysler’s expansion strategy in Asia.
At a time of considerable growth in demand in this emerging market, DaimlerChrysler’s revenues would considerably be reduced without the affiliation of two major regional players, Mitsubishi and Hyundai.
Hyundai is expected to report flat profits for the first quarter after recording weak domestic sales. The fact that it is looking to reduce its alliance to specific and individual projects is significant.
Hyundai has ambitious plans in China, where it is looking to increase its annual production capacity, as well as investments in India, which suggests the company is intent on developing its own competitive strategy without the prerequisite of a major foreign partner.
Doubts over the partnership are expected to be resolved in the next few days, when the DaimlerChrysler board will meet to discuss its strategy in Asia. Indeed, if its collaboration with Hyundai were dissolved, it would need to find another partner in Asia. The board will need to come up with an innovative plan if it hopes to emerge from its current problems with its position in the region enhanced.
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