Daewoo faces break-up as Ford withdraws bid

The ailing South Korean car manufacturer Daewoo was yesterday facing the prospect of being broken up after Ford withdrew its $7bn (£5bn) bid for the company.

The ailing South Korean car manufacturer Daewoo was yesterday facing the prospect of being broken up after Ford withdrew its $7bn (£5bn) bid for the company.

Industry analysts said that the US car giant had been deterred by Daewoo's ever rising debt mountain which stood at $16bn when negotiations began earlier this year.

The withdrawal of Ford could open the way for General Motors and Daimler Chrysler to revive their bids for Daewoo. GM confirmed that it was still interested in the company but Daimler Chrysler said it was no longer planning a bid, adding that Daewoo was "too risky" and required "much restructuring".

The failure of Ford to cement a takeover of Daewoo is a setback for its Asian ambitions. Although it has a stake in Mazda, it has a much smaller presence in the region than either GM or Daimler Chrysler. GM already has stakes in Suzuki, Isuzu and Subaru while Daimler Chrysler is buying a controlling stake in Mitsubishi of Japan.

In a brief statement announcing the withdrawal of its bid, Ford's vice-chairman, Wayne Booker, said: "We believe that a proposal was not possible that would be in the interests of Daewoo and Ford and their respective shareholders."

But the chairman of South Korea's Financial Supervisory Commission, which has been overseeing the sale of Daewoo, blamed Ford's decision on its own internal problems, including the Firestone tyre scandal which has prompted a 15 per cent fall in its share price this week.

Analysts said that the size of Daewoo's debts could put other bidders off, leaving it little option other than a break-up with its Polish Romanian and Indian offshoots disposed of piecemeal. Ford's withdrawal prompted a plunge in South Korean stocks with Seoul's Composite Stock index closing down by 3.37 per cent.