If current trends persist, Asia's once independent and dynamic automobile industry will remain Asian only in a geographical sense. In terms of ownership, it would be a mere 'branch' of Western capitalism. This is because, during and after the years of slow growth in Japan and the financial crises in East Asia, large chunks of the industry have been acquired by bargain-hunting Western automobile companies.
 
This 'Western coup' in the Asian automobile sector is the culmination of two trends. To start with, a merger, acquisition and alliance wave in the international automobile industry that has gained momentum ever since the DaimlerChrysler merger in 1998. As a result of that wave, six big players control 75 per cent of the 44 million-strong global vehicle market. Since Asia is the most rapidly growing segment of that market, it has emerged the thrust area for these leading players. Secondly, this process has been substantially aided by the liberalisation wave of the 1990s in Asia and the crises that afflicted some Asian countries more recently, which have not merely opened up the Asian automobile industry to foreign investors, but virtually forced some of them to go out in search international suitors for ailing domestic firms.
 
The most recent instance of an Asian automobile group that has fallen victim to these tendencies is debt-ridden Daewoo, saddled with liabilities estimated at $16 billion. At the end of June, after a three-month long process, a restructuring committee consisting of Daewoo's creditors chose Ford Motors as the sole bidder for the South Korean car manufacturer. Ford, the world's second largest carmaker, had reportedly offered Daewoo's creditors $6.8 billion for full control over the automobile giant. If the final terms of takeover offered by Ford within a sixty-day period are found acceptable to the Daewoo Restructuring Committee, Ford would have access to a 2 million cars-a-year manufacturing capacity in Asia.
 
The run up to Ford's preliminary victory, saw five players involved in the race for Daewoo: Ford, GM, DaimlerChrysler, Fiat and Hyundai Motors. GM, which had a joint venture with Daewoo sometime in the past and was working out a strategic alliance with it subsequently was the most favoured candidate. And till about a year back GM was the only player Daewoo's creditors were negotiating with. Perhaps because GM expected too favourable a bargain, the restructuring committee decided to go in for an auction involving five players.
 
However, the worldwide restructuring of automobile industry through mergers, acquisitions and strategic alliances soon reduced the field to three. One alliance resulting from that wave was between GM and Fiat Auto in which the former acquired a 20 per cent stake in the latter and Fiat's top shareholders took a 6 per cent stake in GM. These crossholdings were expected to provide the material base for a strategic alliance in world markets. Not surprisingly the two firms joined hands to bid for Daewoo.
 
The other joint bid came from DaimlerChrysler and Hyundai. As part of its bid for Daewoo, DaimlerChrysler struck a deal with Hyundai, wherein it acquired a 10 per cent stake in the latter for an estimated $400 billion. What is significant is that, as part of the transaction, DaimlerChrysler secured an option to increase its initial 9.9 per cent stake by an additional 5 per cent in three years. This, together with the 4.6 per cent of Hyundai owned by Mitsubishi companies, of which Mitsubishi Motors is DaimlerChrysler's Japanese alliance partner, could take the stake of the German-US group to almost 20 per cent of the South Korean carmaker. This could change the balance of ownership at Hyundai, with DaimlerChrysler emerge eventually as the largest shareholder, ahead of the family of Chung Ju-yung, the founder of the Hyundai group, which holds a 11.8 per cent stake in the company.
 
This potential change at Hyundai seems with hindsight more significant that the joint bid for Daewoo made by the two companies. If the bid had succeeded, Hyundai would have indirectly controlled 99 per cent of Korean car market. Since the government would have been forced to respond to the emergence of such a monopoly, it is unlikely that even Juergen Schrempp, DaimlerChrysler chairman, would have expected to win Daewoo. What in all probability was far more important for him was the tie-up with Hyundai, which gave the group access to the Korean market and a major presence in the Asian market as a whole.