Kia Motors Placed Under Receivership Amid South Korea's Corporate Restructuring Efforts

South Korea's automotive sector has been under strain following last year's debt crisis, and Kia Motors Corp. has been no exception. The company, once the country's second-largest car maker, was placed under receivership by a South Korean court, paving the way for potential sale or restructuring. The move comes after Kia was put under a temporary protection program designed by the government to give hobbled companies a chance to stave off collapse. The receivership allows Kia to submit a recovery plan while debt payments are frozen by the court, with management control handed to Yoo Chong-yul, a vice-chairman at Hyosung Industries Ltd.

Key Takeaways:

• Kia Motors Corp. has been placed under receivership by a South Korean court, following a temporary protection program designed by the government.
• The company's debt of 5.1 trillion won ($3.65-billion U.S.) last year, five times its equity, contributed to its financial struggles.
• Kia's current president, Park Je-hyuk, had asked the courts to allow him to act as co-administrator to block any efforts to sell Kia to a third party.
• Analysts say it may be difficult to find a buyer for Kia, with Hyundai Motor Co. the only company to express interest so far.
• Kia has cut its work force by almost 40% and reduced its number of sister companies to 16 from 28 since July, contributing to its return to profitability.
• Kia has continued launching new models despite its crisis, and its main office building downtown is still up for sale.

Statistics:

• Kia Motors Corp. had debt of 5.1 trillion won ($3.65-billion U.S.) last year, five times its equity.
• Kia's commercial-vehicle arm, Asia Motors Co., was also placed under receivership.
• Kia Group has cut its work force by almost 40% since July.
• Most remaining employees have been paid just 60% of their salaries since July.
• Kia has reduced its number of sister companies to 16 from 28 since July.

Sources:

• "Kia Motors Placed Under Receivership Amid South Korea's Corporate Restructuring Efforts" by Namju Cho, The Wall Street Journal
• Kia Motors Corp., "Company Overview"