updated 5/12/2004 9:07:04 AM ET 2004-05-12T13:07:04

DaimlerChrysler AG has decided to sell its 10.5 percent stake in South Korea’s Hyundai Motor Co. and is sharply scaling back other aspects of their 4-year-old partnership, the companies said Wednesday.

The two automakers have agreed to “realign the alliance in order to reflect more realistically current market conditions,” the companies said in a joint statement.

Hyundai has been one part of DaimlerChrysler CEO Juergen Schrempp’s effort to build a global auto giant with a presence in major markets worldwide.

But that effort suffered a blow last month when DaimlerChrysler distanced itself from another Asian partner, Mitsubishi Motors, by refusing to put more money into the debt-laden company. It still owns a 37 percent stake in Mitsubishi, however.

Under Wednesday’s agreement, Hyundai Motor will take over DaimlerChrysler’s 50 percent stake in Daimler Hyundai Truck Corp., a joint venture truck engine-making factory in South Korea. The two sides also scrapped their earlier agreement to build a truck-making joint venture.

DaimlerChrysler spokesman Othmar Klein said the 50 percent truck stake is worth $45 million.

DaimlerChrysler and Hyundai, however, will continue their “world engine project” in which the two and Mitsubishi Motors Corp. of Japan will jointly develop and make a family of four-cylinder gasoline engines.

DaimlerChrysler and Hyundai will also continue their joint procurement of auto parts, and the German carmaker will provide engines for Hyundai’s medium-sized buses, the statement said.

Wednesday’s announcement left unsettled precisely when DaimlerChrysler will sell its stake in Hyundai Motor, South Korea’s No. 1 automaker.

DaimlerChrysler may sell its Hyundai shares “at any time and under some circumstances will do so within certain specified periods of time,” the statement said.

South Korean news media have reported that DaimlerChrysler was expected to sell the shares to overseas investors within a month.

DaimlerChrysler acquired its 10.5 percent stake in Hyundai in 2000 for $428 million and is now estimated to be worth about twice as much.

The two carmakers had agreed to build a joint venture engine plant and truck-making factory. But those plans began to fall apart amid the German automaker’s plans to build Mercedes-Benz cars in China in partnership with Beijing Automotive Industry Holding Co.

In the Mitsubishi case, DaimlerChrysler bought its stake in 2000 to get a partner in small-car development with its U.S. Chrysler and German Smart brands.

Copyright 2004 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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