VZCZCXRO5593
PP RUEHDBU
DE RUEHNT #0611 0881226
ZNY CCCCC ZZH
P 291226Z MAR 06
FM AMEMBASSY TASHKENT
TO RUEHC/SECSTATE WASHDC PRIORITY 5446
INFO RUEHTA/AMEMBASSY ALMATY 7744
RUEHAH/AMEMBASSY ASHGABAT 1848
RUEHEK/AMEMBASSY BISHKEK 2372
RUEHDBU/AMEMBASSY DUSHANBE 2269

C O N F I D E N T I A L TASHKENT 000611 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR SCA/CEN 
 
E.O. 12958: DECL: 03/28/2016 
TAGS: PGOV PREL UZ ZK
SUBJECT: THE END OF THE NEXIA? HYUNDAI LOOKING TO INVEST IN 
UZDAEWOO 
 
Classified By: CLASSIFIED BY AMB. JON R. PURNELL FOR REASONS 1.4 (B, D) 
. 
 
¶1. (C) Summary: A key agenda item for President Islam 
Karimov,s March 28 meetings in Korea will likely be a 
possible Hyundai investment into UzDaewoo.  According to 
UzDaewoo senior management, they were informed just prior to 
Karimov,s departure that Hyundai would likely purchase up to 
half of the company.  The GOU purchased 100 percent of the 
former Korean-Uzbek joint venture in 2005, when GM decided 
not to buy Uzbek operations as part of its overall takeover 
of Daewoo.  UzDaewoo management and local parts producers are 
worried how a Hyundai purchase would affect their businesses. 
 In a separate, but likely related move, the Central Bank has 
severely limited UzDaewoo,s access to hard currency, making 
it nearly impossible for the company to import the necessary 
parts to meet orders.  If the UzDaewoo factory has to shut 
down or decrease operations, due to either a new owner or 
lack of imported parts, it would negatively impact the 
already fragile Andijon economy.  End summary. 
 
¶2. (C) An UzDaewoo representative told Post that the GOU 
intends to sell half the company to Korean-owned Hyundai in 
the near future.  The representative said that the current 
Uzbek Ambassador to South Korea, Vitaly Fen (an ethnic 
Korean), had already broached the idea in Seoul per President 
Karimov,s request.  Despite ongoing negotiations, the GOU 
has kept a possible Hyundai investment very quite, only 
involving the highest levels of government.  In fact, 
according to UzDaewoo representatives, the company,s 
management only learned of the change in ownership structure 
just prior to Karimov,s pending departure for Korea.  The 
potential sale of 49 percent of the automotive company will 
likely be a major topic of conversation during Karimov,s 
March 28 visit. 
 
¶3.  (C) In September 2005, the GOU became 100 percent owner 
of UzDaewoo when it bought out Daewoo Korea. Earlier in 2005, 
Daewoo Korea was purchased out of bankruptcy by General 
Motors.  While General Motors continued to engage with 
UzDaewoo, supplying car parts from its Korean operations, the 
company decided against purchasing Daewoo Korea,s interest 
in the factory, which is located in Andijon. 
 
¶4.  (C) According to our contact, the news of a possible 
Hyundai investment is making everyone, including top 
management, very nervous.  Management is worried they might 
be replaced by Hyundai representatives.  Local parts 
producers are worried that when Hyundai changes UzDaewoo's 
models to be in line with Hyundai brands, the parts they 
produce will no longer be compatible. 
 
¶5. (C) Our contact also noted that the Central Bank has 
limited UzDaewoo,s currency exchange quota to USD 100,000 
for 2006.  This quota will significantly limit the company,s 
ability to import the necessary parts to produce cars.  Once 
the quota is filled, UzDaewoo will be forced to stop all 
imports from international suppliers, including Korean 
GM-Daewoo and German-owned Continental.  (Note:  The majority 
of parts that go into UzDaewoo cars are imported, as local 
factories do not have the technology necessary to produce 
them.  End note.)  Continental told our contact that, due to 
this reality, it cannot extend contracts with UzDaewoo 
because it cannot be assured of payment.  Local car dealers 
cannot accept orders for new cars because they cannot 
guarantee that the factory will be able to supply the 
automobiles to the customer. 
 
¶6.  (C) Comment:  UzDaewoo is a pillar of the economy in 
Andijon and the province,s largest semi-private employer. 
If the company is unable to get parts and decreases 
production, due to either a change in ownership or the 
inability to purchase parts, it will have a direct negative 
impact on an already troubled region. 
PURNELL