Hyundai also won the bidding for Asia Motors, which is controlled by Kia.

Court-appointed chief executive officer of Kia Motors, Lee Jong-dae, said Hyundai had won the bidding for Kia at auction and Daewoo Motor Company was the runner-up.

He said Ford, Kia's current major shareholder, was disqualified after offering a bid price for Asia Motors which was lower than the face value per share of 5,000 won ($3.70).

Kia's caretaker manager Lee Jong-dae made the announcement

The auction panel had ruled that the bid price should not be lower than the face value.

Local newspapers reported that Ford had wanted to buy Asia for 1,000 won ($0.73) per share.

Ford and its Japanese affiliate Mazda hold the largest single stake (16.9%) in Kia. Ford owns 33% of Mazda.

Hyundai chairman Chung Mong-kyu said foreign carmakers and investors, including Ford, would be welcome to invest in Kia.

Hyundai said it would be looking for foreign capital to finance the deal.

It asked for debt of 7.3 trillion won ($5.3bn) to be written off. The demand is expected to concern creditors who have yet to set a date for a meeting to discuss the issue.

Outlook still uncertain

Despite the news of the deal, uncertainties remain about Kia's future.

The company's troubles started in July last year when it faced default on a 10 trillion won ($7.5bn) loan.

An executive at the state-run Korea Development Bank, Kia's main creditor, said it had yet to decide whether to accept Hyundai's offer.

The bank would have preferred Ford to win the bid.

"The Korea Development Bank is only one of the creditors and whether to agree will be decided at the meeting of creditors," the bank's executive director said.

However, South Korean newspapers and TV report that the bank plans to accept the result.

The bank's governor, Lee Kun-young, is quoted as saying: "We will accept the result of the Kia tender, but we still have to look at some details."

Kia and Asia's debts were estimated at around 12 trillion won ($8.75bn) at the end of June, of which Korea Development Bank is owed 15%.

If the bid is rejected, Kia and Asia would have to be liquidated, according to vice industry minister Choe Hong-geon.

"There's no choice but to begin a liquidation process if creditors reject (Hyundai)," Choe said. "I don't think there will be a separate deal being concluded through private negotiations (after creditors reject Hyundai)."

The auction was the third attempt at selling off Kia and Asia. Two earlier attempts failed after creditors refused to go along with bidders' demands for much of the debt to be written off.