Daewoo-wo-wo-wo: White Flags Over Korea?

All kinds of strange news are coming from GM’s Korean foster child Daewoo. Two days ago, Daewoo CEO Mike Arcamone announced: “In 2010, GM Daewoo will be profitable. That is my target.” That didn’t get much traction. Reporters wanted to know how bad last year’s numbers were. Arcamone remained tight-lipped. He admitted red ink for 2009, how much remains anybody’s guess. In 2008, it was $773m worth of red. Last October Daewoo-is-me had to be bailed out by the bailed-out GM to the tune of $413m. Arcamone has some soothing news: “We currently do not seek any other financial support from our creditors.” The operative word is “currently.” There is one way to stop the hemorrhage for good: Pack it in.

Arcamone bravely announced that he would fight to the last bullet, employ “aggressive” sales tactics, improve sales networks, reduce structural costs, launch three new models and manage working capital more efficiently. In other words, the usual measures when you are at your wits end. He did not mention that Daewoo would ditch their dealer network and their name. That was left for later.

Today, Korea’s Chosun Iibo has new dispatches from the crumbling front: “Daewoo has announced a breakup with Daewoo Motor Sales Corp., which used to be its sole network of dealerships. The automaker will choose other dealers.” Their source is none else than Mike Arcamone.

Founded in 1993 by spinning off the sales unit of Daewoo, Daewoo Motor Sales took exclusive charge of selling GM Daewoo cars in the domestic market since 2002, when GM acquired the Korean carmaker. In January, GM Daewoo introduced a system whereby separate dealers are designated in each of the eight regions, and Daewoo Motor Sales’ right in four regions were withdrawn. Note to Arcamone: When your market share goes down, exchanging your whole dealer network is rarely a good idea. Daewoo’s share in Korea was down to 7.9 percent last year from 9.6 percent in 2008. Hyundai and Kia Motors together monopolize more than 70 percent of the Korean market.

The Chosun Iibo thinks dumping Daewoo Motor Sales is a whitewashing maneuver: “There is criticism that GM simply tries to shift the burden from local sales to dealerships so as to minimize its liabilities when it exits the Korean market.” Say what? They bail?

Now, for the next Daewoo-wo-wo news: “General Motors is considering replacing the Daewoo brand with the Chevrolet name in South Korea,” says Financial Times today. Who’s the source of that harebrained rumor? Mikey did it again. Not quite a done deal yet. Arcamone is thinking about it.

According to the FT, “Mike Arcamone, GM Daewoo’s president, yesterday said the company would reveal its decision on the rebranding by the middle of May.”

“This is a huge decision that will have a major impact on our future business and success in Korea,” Mr Arcamone said yesterday. You better believe it.

Before, GM had not used the US brand in South Korea. They thought such a move could alienate the last few customers they have. “Such a move would also face resistance from labor unions,” says the FT. So why now? Preparation for an orderly retreat from the Korean peninsula?

The Chosun Iibo had choice words for that idea: “The introduction of the Chevrolet brand could cause GM Daewoo to lose the two most essential factors for survival — the capacity to develop new models and its own brand identity.”

Let’s see how red Daewoo’s 2009 was. Then, we’ll start the Daewoo Death Watch.