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Illustration by Simon and Emilio.
Business Buzz
Checking under Daewoo's hood

Ford won the bidding in June, but is it willing to pay the price in September? At mid-year the American carmaker put in a 7.7-trillion-won ($ 6.93 billion) bid for the troubled Daewoo motors — South Korea's second-largest carmaker. Ford's enthusiasm was so great that its offer far surpassed two others — those of Hyundai-DaimlerChrysler and GM. But there are many potholes on the road to closing the deal and the sales agreement once hoped to be completed by August has been put off until at least the end of September. Others warn the negotiations may go into the New Year.

Soon after the bidding closed, hundreds of Ford accountants descended on Daewoo's books like bugs on a windshield to see just what it is that their bosses want to spend so much money on. Call it due diligence or call it ugly reality, but what they found is not pretty. With Daewoo's units in Poland, India and other countries under scrutiny, the size of Daewoo's debt slowly emerged. No one put a figure on it, but by all accounts the amount is far larger than Ford says it was led to believe.

Back in Detroit, the Firestone-Bridgestone global tire debacle could still clip Ford. Its popular Explorer sports-utility vehicle was a prime user of the apparently flawed tires. Explorer sales are down slightly, but Ford's total U.S. sales are off 3% over last year, mostly due to foreign competition. The bottom line is that Ford might not have the financial clout it had when it made its offer for Daewoo, which in turn doesn't appear to be worth as much as it seemed. It could be a win situation for both companies — each can blame the other for ruining the deal and walk away from it.

But a Daewoo official, asking for anonymity, says the sale will go through and denies reports that Ford's final offer would be as much as 2 trillion won less than the original 7.7 trillion figure — close to 25% below the original offer. "We have not discussed the final offer yet since Ford has not made an offer yet," the Daewoo official said. But the truth is Daewoo was never an ardent seller (it was coerced by the government) and Ford, realizing just how bad off Daewoo is, might be less of an avid buyer. The odometer on this deal is still running.

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