By on October 15, 2009

You got killed by a Daewoo!

Bailout and reorganization gave GM the fresh start it so desperately needed in the US, but other governments have been decidedly less sympathetic to GM’s plight. Germany saw an opportunity to free Opel from GM’s grip, and now the Korean Development Bank has GM up against the wall over the future of GM-Daewoo. Reuters reports Fritz Henderson flew to Korea to meet with Daewoo’s creditors and put a cheery face on the situation. But calling the talks “very positive” is more tribute to Fritz’s unflagging optimism than an indication that GM-Daewoo is almost out of the woods. GM has no choice but to fight for its only remaining small car development center, the only question is with what?

GM-Daewoo is so far in debt to the KDB that it has no choice but make a public equity offering, a move that Henderson says he supports. But the issue that the KDB wants resolved is how much GM will contribute to such an offering. Without a sweetened pot, it’s hard to imagine investors going to go head-over-heels for a deeper stake in an indebted, sales-losing, shackled-to-GM carmaker. On the point of this contribution however, Fritz was… incoherent.

GM has resources around the world. Resources can be used not only from the U.S., including operations here in Korea. We are able to provide support, if necessary

The problem is that this is only moderately true at best. Daewoo’s offering will be $425m at minimum; the KDB wants that amount doubled. But GM is forbidden from using any of its $50b US bailout money to rescue its foreign division, and where else is The General going to find the cash to hold off its Korean creditors? Fritz’s statement has the vague confidence of someone deciding which leg to cut off to stay alive.

And even if GM does come up with enough money to pull off an equity offering, it has no way of stopping KDB-initiated reforms in Daewoo management. The bank has said it wants a more prominent role in managing the firm, including hiring its own financial officer. The KDB also wants GM to share licenses for jointly-developed vehicles. And even if GM comes up with some money for the share offering, the KDB is likely to expand its share beyond its current 28 percent. In other words, the bank is going to get its way. Daewoo is slip-sliding away, and all of GM’s small car eggs are still in that basket.

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16 Comments on “GM-Daewoo: Grasping At Straws?...”


  • avatar
    John Horner

    I’m looking for GM’s Chinese Joint Ventures to take an ownership share in GM-Daewoo. China is the only place GM has any money. The problem, of course, is that it is very hard to get your money out of China. Ah, the joys of “Free Markets!”.

  • avatar
    MasterOfTheJawan

    Don’t forget their entire Chevrolet european lineup. Those are all rebadged Daewoos too.

  • avatar
    dolorean23

    @Niedermeyer – Interesting article. Once this finalizes I hope this will be the nadir of GM fall from grace and allows those who “manage” it to finally pull their craniums out of their behinds. A small car would be the perfect thing to make and manufacture here in the US. It would lend credance to the commericials of a fresh start, put some people back to work, and give a focus to providing something of value to the customer. People need more choices than just the Cruze however. Hope for the best, plan for the worst.

  • avatar
    PeteMoran

    Fritz’s statement has the vague confidence of someone deciding which leg to cut off to stay alive.

    Fritz the Black Knight! “It’s just a flesh wound”

  • avatar
    Mr Carpenter

    Aw, you beat me to it, Pete.

    It should be noted that GM’s primary Chinese partner, SAIC, are also part-owners of GMDaewoo and were convinced to invest in it from the beginning, 2002. As were Suzuki, which has since left GM’s orbit (and probably thereby saved themselves).

    I suspect that GMDaewoo will eventually become SAICDaewoo and that GM will own nothing of it, except perhaps a token percentage.

    GMDaewoo is not part-owned by GMNA but by GMHolden, which is owned by GMNA (and yes, that is splitting hairs).

  • avatar
    Autosavant

    It is very telling what kind of BS Henderson wastes his obscenely ovepaid work days doing.

  • avatar
    TTACFanatic

    I’m not sure what I’m stepping into by saying this but:

    GM is losing much of its car platform engineering expertise when/if Opel is sold.

    A lot of people assumed that the workload would fall to GM-Daewoo, but what happens if they are wretched away from GM control?

    I doubt the Chinese division is doing a lot of independent development, and I’m not sure the U.S. engineering division is capable of carrying the load all by itself.

  • avatar
    Robert Schwartz

    “the only question is with what?”

    So they can design more Aveoes? I think the real question is why.

  • avatar
    MikeInCanada

    Re dolorean23 :

    A small car would be the perfect thing to make and manufacture here in the US.

    Agreed that’s a happy thought. However before anyone get’s too excited about GM making small cars in volume (at a profit, don’t forget) domestically a sitdown with the local UAW rep is in order to help explain how the pay scale still works around here…..

    GM’s labor costs are only ‘competitive’ with the domestic transplants – not better, and certainly not better then anyone else outside North America or Europe.

    Even then, that ‘competitive’ comparison is an actual domestic Toyota worker to a GM new hire (at the new hire rate). Since when has GM hired anyone new?

  • avatar
    dolorean23

    Re MikeinCanada:

    Sadly you are correct. It will take a fierce wind from the tempest GM reaped to clear it of the old mind set that simply does not work anymore in the 21st Century. However, one can dream that Chevy will begin again from the ashes of its own Hiroshima to become a major player again. Here in the KC area, the Malibu and Aura are manufactured and after visiting the site I came away impressed. I’ve always been a believer (and a repentant dreamer) of labor and the worker and could see that the men and women who worked the facility actually gave two sh**s about what they did and worked hard at it. I believe firmly that if given half the chance and a decent freakin product for once, we could build, distribute, and sell a car that would compete well with the imports.

    Your question of when has GM hired anyone new is valid, but it must be acknowledged that it blows not just on the worker, but most strongly to the Senior Clubhouse where the VPs play.

  • avatar
    mtymsi

    If GM loses control of Daewoo and sells Opel I don’t see how they’re going to have the resources to develop small and midsized cars for the US market. Realistically that means they would all be developed here and they no longer have the staff to accommodate that. Everything and I mean everything points to their total demise.

  • avatar
    Lorenzo

    While GM is losing its design/engineering expertise through the loss of Opel and Daewoo, it was pointed out in a Chrysler thread that there’s a wealth of expertise out of work and willing to work cheap. GM has a chance to rebuild its in-house expertise. If they’re not smart enough to do that, they’re toast.

  • avatar
    mtypex

    Well, if the Germans and Koreans can’t do GM engineering … maybe they could do it here in Detroit?

    I imagine this would be a funny line if we were all cracking it up in the neighborhood bar.

  • avatar
    folkdancer

    GM has no choice but to fight for its only remaining small car development center,

    Building small cars is easy. All you have to do is chop off the rear of a regular size car and call it a Gremlin. GM’s remaining NA designer should be able to do that.

  • avatar
    Monty

    Great writing, Mr. Niedermeyer. I had to double-check the byline to verify the author of this post. You’re just as snarky as Mr. Farago; for illustration look no futher than these two gems:

    “On the point of this contribution however, Fritz was… incoherent.”

    “Fritz’s statement has the vague confidence of someone deciding which leg to cut off to stay alive.”

  • avatar
    pacificpom2

    With Holden building the Cruze next year, perhaps this will be the “world car platform” that Zeta/J-car failed to be. GM won’t need a manufacturer in Korea anymore, just a design house hooked into the web.


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