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To: Norrin Radd who wrote (3998)	9/20/1998 5:53:00 PM
From: DJBEINO	Read Replies (1) \| Respond to of 9582

09-21-98 Hyundai-LG Chip Deal Appears Set to Fall Through The tentative accord between the Hyundai and LG groups to merge their semiconductor units seems destined to fall through as both conglomerates remain miles apart over the managerial control issue, analysts said yesterday. Despite several rounds of negotiations between both top and working-level officials, the two groups have failed to make any progress. Additional stumbling blocks for the LG-Hyundai chip deal, which was part of the landmark agreement on massive industrial realignment among the ''Big Five'' chaebols, are now coming from their foreign competitors, according to government and business officials. The United States and European Union are threatening to launch antitrust probes against the proposed union. Washington is also said to have stepped up surveillance activities to prevent Seoul from diverting rescue loans from the International Monetary Fund and other global lenders to help finance ''big-deal'' corporate restructuring, they said. The gloomy prospect for the Hyundai-LG semiconductor firm is particularly troublesome for the business community. Kim Woo-choong, new chairman of the Federation of Korean Industries (FKI), said in his inaugural news conference last week that negotiations on management rights of the proposed joint firms and consortiums among the Big Five units will be finalized by October 10. When asked about the prospects regarding the Hyundai-LG chip dispute, Kim said,''I'm convinced that the two groups will be able to work out a wise compromise.'' Despite Kim's optimistic forecasts, however, LG and Hyundai remained unwilling to compromise. According to informed sources, Hyundai Chairman Chung Mong-hun and LG Chairman Koo Bon-moo secretly met early last week, but failed to resolve the issue. After the meeting, Koo visited LG Semicon's plant in Chongju, 120 km south of Seoul, and told employees, ''LG is entitled to the management right of a joint chip entity with Hyundai.'' Koo reiterated his commitment to the chip business in a public address last Friday, and said that semiconductors are vital to LG's long-term strategy to specialize in electronics and chemistry. Hyundai's Chung and other top group executives are refraining from commenting on the chip dispute, but remain determined to gain control of the joint chip firm, group spokesmen said. Other conglomerates have recommended that the two groups take turns at the top management post every three to four years, or appoint a foreign chief executive officer. Meanwhile, the trade conflict from Western countries is emerging as a new deterrent to the proposed merger. Under U.S and EU antitrust laws, merged firms, both domestic and foreign, are required to obtain a prior approval if their combined annual turnovers exceed $100 million and $2.7 billion, respectively. The combined turnovers of Hyundai and LG chip units reached $3 billion last year. Moreover, U.S. efforts to block possible use of the IMF money as subsidies for Korean industries drew particular attention, as Seoul is considering extending massive financial assistance to facilitate swaps and mergers among affiliates of the top-five groups.