By on March 12, 2010

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separate dealers are designated in each of the eight regions, and Daewoo Motor Sales’ right in four regions were withdrawn.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.

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7 Comments on “Daewoo-wo-wo-wo: White Flags Over Korea?...”

  • avatar

    When the ship is sinking, rearrange the deck chairs.

  • avatar

    Things seemed a little too quiet on the Daewoo front. Probable (ongoing) financial crisis aside, killing the Daewoo name probably isn’t a bad idea from a global perspective. In Korea, on the other hand, it might not be such a popular idea… after all, isn’t Opel supposed to get more independence, not less?
    Remember when the only halfway good news about GM came from the overseas units? Post-bankruptcy, Opel and Daewoo have been GM’s biggest trouble spots, and they’ll probably stay that way until they get their cut of taxpayer cash. Two huge open questions right there, with much of GM’s development expertise (not to mention a good chunk of global sales) hanging in the balance. Not good.

  • avatar

    As I read the title…

    I kept thinking the starter motor or battery was dying.


  • avatar
    Extra Credit

    Getting a Korean auto company to profitably produce vehicles that are desirable in competitive markets around the world sounds like a herculean task to me.
    Oh wait, never mind.

    • 0 avatar

      Just like you can’t use Toyota to stereotype all the Japanese automakers, you can’t use Hyundai to stereotype all the Korean automakers.

      In fact, when I think about it, Hyundai-Kia is the only Korean automaker that makes decent cars. That also explains why they are the only one that isn’t a punch line. (Ssang Yong, anyone?)

  • avatar

    Here I read the first part of your reply and actually thought that was a serious question. ;)

    Just like some people mistakenly believed that GMDAT was actually a serious venture and not another attempt by GM to make a quick buck with cheap engineering and big volume.

  • avatar

    So GM takes on the CUV craze with Aztec, the global warming craze with a coal-burner, and the Korean craze with Daewoo.

    It’s almost like there’s a pattern here.

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