Kia puts off construction of $1.2 bn plant in US

Seoul, May 18 | Updated: May 19 2006, 05:51am hrs
Kia Motors Corp said on Thursday it was indefinitely postponing the start of construction of its $1.2 billion US car plant amid an ongoing probe into the firm and its parent Hyundai Motor Co.

The move comes after Hyundai Motor said on Tuesday it was delaying the start of building a 1 billion euro ($1.28 billion) auto factory in the Czech Republic, although it signed a final contract later on Thursday.

The construction of the plant in Georgia has been postponed following a delay of a groundbreaking ceremony, and we have not decided when to begin, Kia spokesman Kim Do-hag said by telephone.

Kia is South Koreas second-largest auto maker. Now we cannot guarantee that we can begin production as scheduled, he added.

On Wednesday, Honda Motor Co, Japans third-biggest auto maker and a competitor for Kia and Hyundai, outlined an expansion plan that includes new car plants in the US and Japan. In March, Kia said it would build its first US plant in Georgia to help offset the impact of a strong won currency and grab a bigger share of the US market, the worlds largest. Kia has previously said it expected the new plant, which was scheduled to start production in 2009, to produce up to 3 lakh vehicles a year and employ about 2,500 workers.

South Korean prosecutors, who indicted Hyundai Motor chairman Chung Mong-koo on charges of embezzling $109.7 million in company funds, said they planned to indict Chung Eui-sun, the president of Kia and the son of the chairman.

Analysts are concerned that the investigation and continued detention of Chung Mong-koo could create a leadership vacuum and delay the groups ambitions to become the worlds No 5 auto maker by 2010.