1
THE CHANGING PATTERN OF THE RELATIONSHIP BETWEEN
GENERAL MOTORS AND DAEWOO MOTOR
: AN ANALYTICAL STUDY FOCUSING ON THE PROCESS OF
RELATIONSHIP SHIFTS
By
Sung Youn Lee
Major in International Trade
GRADUATE SCHOOL OF INTERNATIONAL STUDIES,
SOGANG UNIVERSITY
December 2003
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THE CHANGING PATTERN OF THE RELATIONSHIP BETWEEN
GENERAL MOTORS AND DAEWOO MOTOR
: AN ANALYTICAL STUDY FOCUSING ON THE PROCESS OF
RELATIONSHIP SHIFTS
By
Sung Youn Lee
Advisor: Prof. Dr. Se-Young Ahn
A thesis submitted to the faculty of Sogang University
in fulfillment of the requirements for the degree of
Master of International Studies
Major in International Trade
GRADUATE SCHOOL OF INTERNATIONAL STUDIES,
SOGANG UNIVERSITY, SEOUL, KOREA
December 2003
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GRADUATE SCHOOL OF INTERNATIONAL STUDIES
SOGANG UNIVERSITY
COMMITTEE APPROVAL
of a master’s thesis submitted by
Sung Youn Lee
This thesis has been read by each member of the supervisory committee and by
majority vote has been found to be satisfactory.
December, , 2003
Referee Prof. Dr. Jae-Chun Kim (Chairman)
Referee Prof. Dr. Se-Young Ahn
Referee Prof. Dr. Chol Lee
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TABLE OF CONTENTS
I. Introduction ··············································································································· 1
II. Analytical Frameworks ···························································································· 4
1. Lewicki-Hiam’s R-O Model ········································································· 5
2. Interdependency Cube Model ······································································· 8
III. The Changing Pattern of the Relationship between GM-DM; from Partnership to
M&A Negotiators ······································································································· 14
1. Historical Overview ···················································································· 14
2. Partnership (1972 ~ 1992) ··········································································· 17
3. Competitors (1993 ~ 1998) ········································································· 21
4. M&A Negotiators (1999~2002) ·································································· 38
IV. Aspects of Consideration from the Historical Relationship of GM and DM ········56
1. Shifts in the Balance of Power ···································································· 57
2. The Superior Negotiation Know-how of GM from 1999 to 2002 ·············· 61
3. The Typical Obstacles Blocking Korean Firms in International Business
Working with Cross-border Partners ··························································· 69
V. Conclusions ············································································································ 73
References ·················································································································· 78
Appendices ················································································································· 84
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LIST OF TABLES
[Table 1] The Long-term Cells of the Interdependency Cube ···································· 11
[Table 2] History of DM and GM ·············································································· 15
[Table 3] Overseas Car Plants of Daewoo Motor ······················································ 24
[Table 4] Countries Entered by Daewoo Motor ························································· 26
[Table 5] Terms of Contract between FSO and DM ·················································· 30
[Table 6] Market Share in Poland ·············································································· 32
[Table 7] Overview of DM’s Presence in India ························································· 34
[Table 8] The Chronology Negotiations for GM’s Acquisition of DM ····················· 40
[Table 9] MOU and Final Formal Contract Terms ····················································· 49
[Table 10] Overview with Analytical Frameworks ···················································· 60
[Table 11] Global Vehicle Production and Sales by Manufacturer ···························· 84
[Table 12] General Motors’ Global Brand Positioning ·············································· 86
[Table 13] Overseas Affiliates of Daewoo Motor ······················································ 86
[Table 14] Overseas Production Plants of Daewoo Motor and Capacity ··················· 87
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LIST OF FIGURES
[Figure 1] Lewicki-Hiam’s R-O Model ······································································· 6
[Figure 2] Interdependency Cube ················································································· 9
[Figure 3] R-O Model Analysis: Step 1 ····································································· 20
[Figure 4] Timeline for GM’s Global Investment ······················································ 25
[Figure 5] R-O Model Analysis: from Step 2 to Step3 ·············································· 39
[Figure 6] R-O Model Analysis from 1972 to 2002 ··················································· 55
[Figure 7] Interdependency Cube Analysis ································································ 59
[Figure 8] Cherry-picking Acquisition by GM ·························································· 66
[Figure 9] Price Change for DM’s Acquisition ·························································· 68
[Figure 10] Conflicts among Interest Groups ···························································· 72
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ACKNOWLEDGEMENTS
This thesis could never have been possible without the backing of
numerous individuals. I wish to express my sincere gratitude to my advisor,
Prof. Se-Young Ahn. His leadership, patience and trust enabled me to reach
my goal. I am grateful for his superb guidance and for the extraordinary
generosity with which he gave his time.
I am also grateful to the other members of my thesis committee, Prof. Jae-
Chun Kim and Prof. Chol Lee. I was truly privileged to have such a
remarkable team.
Special recognition belongs to Young-seok Chae of Global Auto News, who
gave me practical advice, and Curt Hutchison of the Foreign Language Center
at Dongguk University, who read the full manuscript and helped me improve
the final product. I am also indebted to Prof. Chong-ha Yoo, who provided
me with valuable opportunities, and my friends, Yoon-sun Kim, Sang-su Lee,
and Byung-kun Kim, who created a loving and supportive environment during
my time at Sogang GSIS. Finally, I dedicate this work to my parents, whose
good thoughts, wishes, help and love were constant reminders of what I can
accomplish.
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ABSTRACT
This dissertation examines the changing pattern of the relationship
between General Motors and Daewoo Motor, with an analytical study of the
process of the relationship shift from 1972 to 2002. Lewicki-Hiam’s
Relationship-Outcome Model and Dabholkar-Neeley’s Interdependency Cube
Model are applied as analytical frameworks.
The path of the relationship between General Motors and Daewoo Motor
is divided into three forms within the analytical framework of the
Relationship-Outcome Model: Partnership (collaboration: 1972~1992),
Competitors (competition: 1993~1998) and M&A Negotiators
(accommodation: 1999~2002). The analysis is then extended with an
investigation into the shifts in the power balance between the two companies
as seen through the Interdependency Cube Model. Additionally, there are
examinations of the superior negotiation know-how displayed by General
Motors from 1999 to 2002 and the obstacles that hinder Korean firms with
cross-border partners or competitors.
As long-term relationships are often inconstant, the study concludes that
taking a gradual approach to targeted investment partners, building credibility
with them and developing improved negotiation strategies are preferable to
maximize outcome and minimize risks in cross-border partnerships.
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I. INTRODUCTION
On April 30th, 2002, General Motors signed a contract to purchase
Daewoo Motor. The South Korean automaker had gone bankrupt and the
South Korean government was under pressure to attract foreign investment for
the restructuring of its corporate sector following the 1997-98 Asian financial
crisis. The sale of Daewoo Motor to a foreign buyer signaled the
disappointing end of a company of major economic and symbolic importance
to South Korea and its people.
Both Daewoo Motor (DM1) and General Motors (GM2) were leaders and
symbols in their respective sectors of the automotive industry - DM for South
Korea and GM for the world market. The two companies had a relatively
long relationship prior to DM’s fall. From the beginning of their relationship
in the 1970s, they had been both partners and adversaries. As the years
passed, the balance of power between them shifted greatly. DM’s
relationship with GM grew from that of a minor partner to a major competitor
in emerging markets, and together, they saw ups and downs in the volatile
automotive market throughout the 1980s and 1990s. Yet in the end, their
1 From this point on, Daewoo Motor will be denoted as DM. 2 From this point on, General Motors will be denoted as GM.
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relationship was terminated with GM’s acquisition of DM for far below its
fair value in 2002. Their thirty-year relationship concluded with GM as the
winner and DM the loser. How could a giant in the Korean automotive
industry have come to such an end? What factors affected the final result of
their relationship? Was the mismanagement of DM the only reason for the
result? And how could a giant in South Korean industry be sold for such a
low price?
When considering the GM-DM case, most examinations in Korea have
so far maintained a biased focus from the perspective of the sale of national
assets to “foreign invaders.” Little attention has been given to the study of
cause and effect on the process of their changing relationship. The turbulent
history of GM and DM and the contribution of internal and external factors
surrounding both corporations in the final negotiation process have not yet
been given enough consideration. A deeper analysis of these issues may
yield the real lessons of this case – lessons that could someday be of use to
other unfortunate Korean firms facing a similar situation.
Thus, the main concern of this study will be to provide a historical
context for the GM-DM relationship and to discover what lessons can be
learned from its changing pattern. This examination will utilize two
analytical frameworks to assist in depicting an outline of the relationship
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shifts between GM and DM in the context of both an overall and a specific
view. These frameworks will be explained in the following section.
This study was conducted through the analysis of documentary sources
including scholarly articles; official reports acquired on-line, public releases,
books and articles in newspapers, which dealt with GM and DM. These
sources, as well as the two theories for the analytical toolkit, are quoted,
referenced and edited in this study. The Relationship-Outcome model of
Lewicki and Hiam and the Interdependency Cube model of Pratibha A.
Dabholkar will be applied to analyze the form of the GM-DM relationship
within the context of their negotiation strategies and individual circumstances.
At the same time, specific events will be used to focus more on an
understanding of each negotiation party’s position at certain stages.
Since there is obviously no way for writers to have direct knowledge of
what occurred at the actual negotiation table, this analysis may suffer from
limitations regarding certain issues. In order to avoid any self-serving
rationales, the appropriate statistical data and materials from a variety of
channels are adopted.
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II. ANALYTICAL FRAMEWORKS
For this study, a pair of analytical frameworks was employed in order to
analyze the changing pattern of the relationship between GM and DM.
First, ‘Lewicki-Hiam’s Relationship-Outcome Model’ will be introduced
for a deeper examination of GM’s long-term stance. With the portion of
relative importance influenced by two main factors - the perceived importance
of relationship and of outcome, corporations can determine their own
positions among five strategies. In this model, the form of the relationship
between GM and DM is classified into three stages, which will be introduced
in later chapters.
Second, the ‘Interdependency Cube Model’ will also be applied. In this
model, based on three critical dimensions, the temporal grid, the balance of
power grid and the orientation grid, ideas can be developed about the
positioning of each relationship situation. This framework will emphasize
the importance of companies maintaining “flexibility” in order to successfully
address environmental and organizational changes according to the balance of
power shift. A more detailed explanation of each framework follows.
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1. Lewicki-Hiam’s R-O Model3
According to the Relationship (R) - Outcome (O) Model4, the
relationship in a negotiation strategy is determined by two factors. One
is the perceived importance of relationship, which is shown on the Y-axis
in Figure 1, the other is the perceived importance of outcome, which is
shown on the X-axis. The player’s behavior can vary to some extent
from issue to issue. Based on this assumption, the negotiation strategies
are categorized according to the following 5 situations.
1) Accommodating strategy: lose to win
This is a relation-oriented strategy. In this type of strategy,
negotiators with common interests generally trust their negotiating
counterpart’s intentions and may lose little by deferring to the other’s
wishes. This situation is also called a ‘relationship situation’ or ‘lose to
win’.
3 For this chapter, I referred the following book; Se-young Ahn, 「Global Negotiation Strategy」(Seoul: Pakyoungsa, 2003) 97-101. 4 From this point on, the ‘Relationship – Outcome Model’ will be denoted as the R-O model.
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[Figure 1] Lewicki-Hiam’s R-O Model
Source: Se-young Ahn, 「Global Negotiation Strategy」(Seoul: Pakyoungsa, 2003) 98.
2) Competitive strategy: win to lose
Considerable conflict of interest is expected for this ‘competitive
strategy,’ especially for any parties who have a relatively minor
relationship. This is also called a ‘transactional’ or ‘pizza-cutting’
situation.
Accommodation Collaboration
Compromise
Avoiding Competition
(Relationship Situation)
(Transactional Situation) (Indifferent Situation)
(Win-Win Situation)
(Compromise Situation)
The perceived importance of outcome The perceived im
portance of relationship
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3) Collaborative strategy: win-win
This is also called the ‘win-win’ or ‘pizza-cooking’ situation. For
this strategy, mutual trust among negotiation parties is essential. By
sharing information and opening the bottom line of a goal, those players
induce maximum outcome from the deal.
4) Avoiding strategy: lose-lose
This involves not participating in the progress of a negotiation.
This strategy can be adopted through several measures, such as taking no
action, a notification of cessation of further negotiations or a retreat from
the negotiation table.
5) Compromise strategy: split the difference
With intermediate gains, negotiators may be willing to give up some
satisfaction, but not all. Compromise has elements of both cooperation
and non-cooperation - yielding competition to a counterpart but also
holding out something for oneself. This is the most frequently exercised
strategy as it has several favorable points, such as a sense of reciprocity,
its simplicity in understanding and time saved through quick settlements.
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2. Interdependency Cube5 Model
The purpose of this analytical framework is to describe eight
alternative types of business-to-business interdependencies, or
relationships, and to provide a framework, the Interdependency Cube,
whereby businesses can identify where they are with a given partner at a
point in time and develop an understanding of how to move from one
type of interdependency to another (within the proposed framework) to
another, as their circumstances change. This cube will be used to
supplement the ‘R-O model’ since the R-O model is not able to cover the
role of ‘power balance’ affecting relationship determination. As with
the R-O model, this toolkit will be adopted to explain the three main
stages in the GM-DM relationship from 1972 to 2002. Thus, for the
purposes of the following examination, the eight interdependencies of the
cube will be narrowed down only to those that refer to long-term
conditions.
5 Prabibha A. Dabholkar and Sabrina M. Neeley, “Managing Interdependency: a Taxonomy for Business-to-business Relationships.” Journal of Business and Industrial Marketing. Vol. 13, NO. 6 (1998): 439-460.
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1) Three critical dimensions of the Interdependency Cube
(1) The temporal grids
One critical dimension that determines the type of interaction
that businesses engage in is the temporal perspective associated
with that interaction. The long-term perspective is defined as
including repeated transactions between parties, either by choice
or because of market conditions, over an indefinite length of
time.
[Figure 2] Interdependency Cube
Source: Prabibha A. Dabholkar and Sabrina M. Neeley, “Managing Interdependency:
a Taxonomy for Business-to-business Relationships.” Journal of Business and
Industrial Marketing Vol. 13, NO. 6 (1998): 442.
(5) (8)
(6) (7)
(5) (8)
(6) (7)
(4) (1)
Individual
Orientation
Joint
Orientation
Unbalanced
Power
Balanced
Power
Short-term
Long-term
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(2) The orientation grids
Another dimension is goal orientation (individual vs. joint
gain). As the term suggests, ‘individual gain’ indicates a focus
on the business’s own benefit to the exclusion of it partners’,
whereas ‘joint gain’ implies an orientation toward mutual benefit.
(3) The balance of power grids
The two conditions related to this dimension are ‘balanced
power,’ where the businesses in the interaction are somewhat
equal in power, and ‘unbalanced power’ where one partner is
clearly more powerful.
2) The four cells in the long-term grid
For the purposes of this study, the use of the cube is limited to the
examination of the relatively long-term picture. Thus, the
following 4 cells are the only factors that should be considered.
(1) Command relationships
‘Command’ relationships result when one party has a
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dominant position of strength in the negotiation process.
[Table 1] The Long-Term Cells of the Interdependency Cube
The Four cells
Relationship Temporal Grid Balance of Power Grid Orientation Grid
1) Command Unbalanced Power Individual gain
2) Divergent Balanced Power Individual gain
3) Coordinative Balanced Power Joint gain
4) Keiretsu
Long-term
Unbalanced Power Joint
gain
Source: Prabibha A. Dabholkar and Sabrina M. Neeley, “Managing Interdependency:
a Taxonomy for Business-to-business Relationships.” Journal of Business and
Industrial Marketing Vol. 13, NO. 6 (1998): 442.
(2) Divergent relationships; win-lose
Sometimes business-to-business partners engage in repeated
‘win-lose’ negotiation behaviors and thus often sacrifice the
benefits of increased communication and mutual trust. These
are called ‘divergent’ relationships because despite the existence
of a relationship, the partners appear to head along divergent
paths.
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(3) Coordinative relationships
Companies, which, under conditions of balanced power,
attempt to engage in mutually beneficial partnering
arrangements, are considered to be in a “coordinative”
relationship. This relationship begins with shared business
goals, and is associated with a problem-solving approach and
information sharing. The businesses in a coordinative
relationship are flexible in resolving issues, engage in two-way
communication, understand cultural differences, and display a
willingness to explore alternative solutions.
(4) Keiretsu relationships
The idea of emphasizing joint goals is not exclusive to
business-to-business partners that pursue joint goals under the
conditions of balanced power. Japanese companies often
engage in the type of relationships described by ‘keiretsu’
relationships. A keiretsu relationship can occur between
companies desiring channel (production keiretsu) or financial
(financial keiretsu) partners. Production keiretsu is a distinctly
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Japanese practice used to manage the ‘make or buy’ decision by
focusing on goals of production economies and distribution
channel synergies. The relationship between Toyota and its
parts suppliers are traditionally considered to be one of the best
examples of a production keiretsu.
In the following chapters, the overall relationship shift between GM and
DM will be categorized according to the preceding toolkits. In addition,
several significant events that played major roles in the relationship shift will
be studied in detail. Through this process, lessons for Korean companies
that would like to develop further relationships with cross-border partners can
be revealed.
III. THE CHANGING PATTERN OF THE
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RELATIONSHIP BETWEEN GM-DM; FROM
PARTNERSHIP TO M&A NEGOTIATORS
1. Historical Overview
GM has been involved in the automotive business in Korea and with
DM for over 3 decades. (See table 2) The two companies had been
partners in joint ventures for a considerable amount of time prior to the
acquisition. In this study, the changing pattern of their relationship is
divided into the following three forms.
First, GM and DM started their relationship as ‘partnership.’ GM-
Korea was initially established on June 7, 1972 as a joint venture between
Shin-jin, DM’s original name, and GM. In 1976, the name ‘Shin-jin’
was changed to ‘Sae-Han’, and in 1978 the automaker’s Korean owners
took control of the company by purchasing shares held by the state-run
Korea Development Bank. GM had previously owned 50% of DM, but
the partnership was dissolved in 1992 when Daewoo decided to develop
its own automobile models rather than license GM’s old designs.6
6 “Investing South Korea: Bargains galore.” The Economist 7 Feb. 1998, 67.
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[Table 2] History of DM and GM
Period Historical Events
1972 GM Korea established.
1976 11 Renamed Sae-han Motor.
1978 Daewoo group involved in the acquisition of Sae-han with GM.
1978 7 Partial managerial control acquired by DM.
1982 12 Renamed Daewoo Motor.
1992 10 Joint-business terminated.
1995 7 Production of Cielo started in India.
1995 11 Acquisition of Poland FSO by DM
1998 9 Acquisition of Ssangyong Motor
1999 8 Daewoo entered ‘workout program’.
1999 12 Public bidding for DM sales
2000 9 Ford's retreat
2001 9 Signing of MOU with GM
2002 4 Signing of final formal contract for GM’s DM acquisition
Source: “Corporation Data,” 「The Korea Economic Daily」1998.
Second, GM and DM entered into a relationship of ‘Competitors’ after
the split of the joint partnership in 1992. From this point until DM’s
bankruptcy, the two companies faced each other in emerging markets as
competitors.
Finally, their competing relationship shifted to that of ‘M&A
negotiators’ in 1999 when DM was no longer able to run its business by
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itself.
In the following chapters, the changing pattern of the relationship
between GM and DM will be examined in detail. In addition, ‘Lewicki-
Hiam’s R-O Model’ will be applied to draw a picture of the overall
changing pattern of the two companies’ relationship. GM’s stance
regarding DM during all three periods was heavily influenced by a
variety of factors – both within the company and without. These factors
individually and collectively contributed to the evolution of GM’s ever-
changing position regarding DM.
2. Partnership (1972 ~ 1992)
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GM-Korea was initially established on June 7, 1972 as a joint venture
between Shin-jin (DM’s original name) and General Motors. In the
stage of their joint business, GM took charge of technology development,
sales and distribution, while DM was forced to take the role of being
purely a subcontractor production base. At that time, GM believed the
separated arrangement would allow the company to exploit the lower
wage costs in Korea in order to compete with Japanese car companies in
the US compact car market, while DM saw the partnership as an
‘opportunity’ to gain recognition in the world automotive market. In
other words, their joint partnership was started with the objective of a
‘synergy effect’ (win-win situation). Thus, the initial partnership
period of GM-DM, from 1972 to 1992, can be explained as
‘collaboration’ according to Lewicki-Hiam’s R-O model. GM-DM
initiated joint business for mutual gain, and it is considered that they had
a high degree of perceived importance of both relationship and outcome.
In the 1980s, however, their partnership was tested by several
difficulties, which later caused their split.
The first difficulty arose from internal conflicts in the production
process. For example, GM blocked DM’s attempts at self-improvement
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by refusing to transfer technology or to allow DM a research and
development capacity. GM allowed DM to begin the development and
production of its own models only after the failure in the Korean market
of the ‘Le Man,’ the model name of the car produced by the GM-DM
partnership. DM was contracted to produce 'Le Man' for GM on an
OEM (original enterprise mark) basis.
Second, sluggish domestic sales in Korea raised questions about the
effectiveness of the GM-DM partnership. GM had predicted ‘Le Man’
would sell 100,000 units per year, but it turned out to be a dud, selling
only 240,000 units over a seven-year period.
The third negative aspect of the GM-DM partnership was the
inefficient production contract, which adversely affected sales. To
obtain models and core components developed by GM and its
subsidiaries, DM had to pay 8 million dollars in development and design
costs to OPEL, a German-based subsidiary of GM. In addition, when
the model went into mass production, DM had to pay a royalty of 120
dollars per unit for the use of the technology. Furthermore, DM had to
import the core components, such as engines and transmissions from
OPEL and its partners, GM and Isuzu, making the payment in Deutsche
marks and Japanese yen. This practice increased the production cost for
27
DM to its great disadvantage.7 Additionally, rising labor costs in Korea
during 1980s further increased the price of the final product.
Figure 3 shows the development of the relationship of the two
companies. It also indicates the three main reasons that led to the
change from collaboration to competition; 1) the divergent goals of GM
and DM; 2) sluggish sales in the Korean market and 3) inefficient
production systems. Thus, this particular relationship, or partnership,
was eventually considered unsuccessful because neither company
achieved its goals with those reasons. Finally, the companies chose to
part ways in 1992, with GM selling its half-ownership in DM.
[Figure 3] R-O Model Analysis: Step1
7 “The Daewoo Motors Rescue IV” Korean Confederation of Trade Unions (2000):
Online, Internet : http://www.kctu.org/arguments/daewoo-01.htm.
I. Collaboration
1972 ~ 1992
II. Competition
The Perceived Importance
of Relationship
• Divergent goals
between GM and DM
• Sluggish domestic sales in
Korean market
• Inefficient production systems
29
1) Historical background
As pointed out in the earlier section, the partnership of GM-DM
faced a turning point due to 1) the divergent goals between GM and
DM, 2) sluggish domestic sales in Korea and 3) an inefficient
production contract. From 1992 to 1998, GM-DM entered a
relationship of ‘competitors.’ With the termination of joint business
in 1992, neither corporation needed to consider any further
relationship issues. DM directly clashed with GM in several
markets, mainly in the mid-1990s. During this period of conflict,
both GM and DM were competing on a ‘level playing field,’ or equal
terms on which to compete.8 The three critical confrontations in
both Korea and other overseas markets were observed in 1) the
competition for FSO acquisition in Poland, 2) the production race in
the Indian market, and 3) DM’s acquisition of Ssangyong Motor in
the Korean market. The only priority for GM and DM was to
increase their own market shares in their targeted countries. Thus,
the pattern of relationship for this period is defined as ‘competition,’
8 “Level Playing Field,” Chambers 21st Century Dictionary (2001): Online, Internet, 4 Dec. 2003: http://www.xreferplus.com/entry/1212307.
30
which has both a high degree of perceived importance of outcome
and a low degree of perceived importance of relationship. (See figure
3) The following critical circumstances explain why the pattern of
their relationship necessarily shifted from a form of ‘partnership’ to
one of ‘competitors’.
First, in October 1992, DM took full control of itself by
purchasing the remaining 50% of equity from GM. Its full
ownership of itself allowed DM to become more competitive by
providing it with the freedom to explore new markets and expansion
strategies.
Second, both GM and DM saw new markets as the best way to
ensure their survival. With the collapse of Communism following
the end of the Cold war in the 1990s, the two companies found
themselves competing against each other in Eastern Europe.
For DM, opening markets in former Soviet states was especially
attractive as, by the terms of its separation from GM, it was
prohibited from exporting its products to Western Europe and
31
America until the mid-1990s.9 DM was eager to enter new markets
since the size of the South Korean market was not sufficient for
growth and the low domestic labor cost, which had been the greatest
advantage to the Korean automotive industry, was no longer low
enough to guarantee international competitiveness.
Due to their large potential, former communist countries were
attractive or GM as well, although it already had Opel, a 100% of
subsidiary, as a strategic base for the European market. Thus, both
corporations competed over emerging markets in Eastern Europe and
the Asia-Pacific region, which had latent purchasing power and
offered redundant labor at low costs. If a closer look at GM’s
historical cross-border investment is taken, it is becomes clear that
GM was especially active in Eastern Europe and the Asia Pacific
region during the 1990s. As the Figure 4 shows, GM’s earlier
cross-border investment was mainly concentrated in Latin America
and Western Europe in order to take advantage of the geographic
location of the former and technology transfer with the latter. As
time went by, GM’s objectives in cross-border investment shifted to
9 Geong-ung Gal and Do-sung Choi, 「M&A Case Studies」(Seoul:Changhae, 1998) 141.
32
markets that were able to provide both production and sales.
Third, the two automakers adopted a similar approach to enter new
markets. DM’s strategic approach to emerging markets had been
focused more on a form of joint venture or M&A rather than ‘green
field’ investments.10
[Table 3] Overseas Car Plants of Daewoo Motor
Acquired plants by M&A Newly established plants
Country Poland FSO, FSL, Ukraine,
Romania, India, Czech
Uzbekistan, Iran, Egypt,
Vietnam, Indonesia,
Philippines, China
Capacity 1,320,000 299,000
Source: “Discover Daewoo,” 「Daewoo Development of Human Resources:
Training Resource」(1998).
10 Geong-ung Gal and Do-sung Choi, op.cit., 140.
33
1929
Western Europe
Germany
U.K.
Netherlands
Belgium
Denmark
Switzerland
1920s 1930s 1940s 1950s 1960s 1970s 1980s 1990s 2000s
1925
1945
1924
1923
1935
Latin America
Argentina
Uruguay
Venezuela
Colombia
Chile
1925
1925
1944
1956
1969
Asia-Pacific
Australia
South Korea
China
India
Indonesia
Japan
Malaysia
1931
1972
1998
1995
1993
1994
1989
Eastern Europe
Czech & Slovak
Poland
Russian Fed.
1996
1991
1994
[Figure 4] Timeline for GM’s Global Investment
Note: Assembled with the data of GM’s web page;
http://www.gm.com/company/corp_info/history/?section=Company&lay
er=CorporateInfo&action=open&page=0
34
As table 3 indicates, the capacity difference between ‘acquired
plants by M&A’ and ‘newly established plants’ shows that it is
obvious that DM’s preferred method of expansion was M&A.11
GM, however, had also been known to expand its presence
through various forms of M&A. Thus, the overlapping strategies of
the two companies caused a series of conflicts. In addition, DM’s
sudden rise in emerging markets in just a half-decade quickly
threatened its competitors. Table 4 shows the increase of DM’s
presence in markets worldwide. It also shows a more than two-fold
growth from 65 markets in 1992 to 150 in 1997.
[Table 4] Countries Entered by Daewoo Motor
Year 1992 1993 1994 1995 1996 1997
Number of countries
entered 65 94 115 130 167 150
Source: Joo-yong Park, 「A Comparative Study on Theories of Direct Investment
and Cases at Daewoo Group」88, quoted in “Discover Daewoo,” 「Daewoo
Development of Human Resources」(1998).
11 The founder of Daewoo, Kim Woo-Joong, said in his best-selling autobiography;
‘M&A is an economic way to save time.’
35
Thus, 1) the takeover of DM ‘s full ownership in 1992, 2) the need
for new markets for both GM and DM, and 3) their overlapping
approaches into emerging markets played major roles for the
relationship change from ‘partnership’ to ‘competitors.’
Consequently, conflicts between DM and GM mounted and
examples of these conflicts can be observed in the following three
sections: Competition for FSO Acquisition, Production in the Indian
Market and DM’s Acquisition of Ssangyong Motor.
2) Confrontations in newly emerging markets and Korean market
(1) Eastern Europe: Competition for FSO Acquisition (1995)
① Background
The most remarkable example during the competing
period (1993-1998) might be DM’s acquisition of FSO in
Poland. DM was particularly active in former socialist
countries12, but not in developed markets such as Western
Europe and North America. At that time DM didn’t have
12 “Mr. Kim’s One-man Empire,” The Economist 27 Jan. 1996, 56.
36
advanced technology so it was impossible to be competitive in
those regions. In addition, DM’s contract with GM restricted
its exports to those markets.
In August 1995, Kim Woo-Joong, CEO of the Daewoo
group, signed a deal with the Polish government giving him
exclusive rights to negotiate for a 60% stake in FSO, a state-
owned car factory which made about 100,000 outdated Polonez
cars a year. FSO’s future had appeared to lie in a tie-up with
America’s GM, with which it had a joint venture assembling
Opel Astra from German kits. But the president of DM had
promised spend $1.1 billion to turn FSO’s archaic plant into a
modern factory capable of producing 220,000 new cars a year
by 2001.13
The deal was quite a coup, apart from pulling the local rug
out from under GM, the world’s biggest car company; it took
DM’s investments in Eastern Europe to more than $3.5 billion.
And it fit in with the president of DM’s belief that the best way
into the developed markets of Western Europe was via their less
13 “Mr. Kim’s Big Picture,” The Economist 16 Sep. 1995, 73.
37
developed neighbors.14 In this deal, DM defeated GM
suddenly and boldly. The differences in their approaches to
the FSO deal determined who would be successful.
② Competition in detail
GM’s position was that FSO was useful only for the Polish
market since its Opel subsidiary in Germany was adequate to
take charge of the European base. GM was only interested in
FSO as a sub-plant, but as it had an annual yearly production
capacity of 10,000 units with employees numbering around
22,000, GM felt it would only be worth getting involved with
FSO if there were major employment cuts.
For DM, however, the deal was much more significant, for
two reasons. First, FSO was important not only as an entrance
into the Polish market but also as a strategic base to further
enter the European market. DM planned to broaden its
production and sales in the European market, and FSO provided
a great opportunity toward that end. Thus, DM was perfectly
willing to comply with the Polish government’s wish to
safeguard the jobs of the plant’s workers. The following table
14 Ibid.
38
is for the terms of contract between FSO and DM. It shows
DM’s assurances of job security for three years. It was the
single most influential factor in the Polish government’s final
decision to go with DM. DM’s strategy in this deal was
superior to GM’s since it took into account the Polish
government’s priority of job security.
[Table 5] Terms of Contract between FSO and DM
Equity holding DM 68.4%, Polish government and labor 31.6%
Investment 1.1 billion dollars for six years
Employment Guarantee of same level of employment for three years
Note: This chart is information found in newspaper articles.
Second, DM needed access to technology transfer with
Europe and the elimination of trade barriers that a European
production base could provide. One of DM’s weakest points
was its lack of homegrown technology. It depended heavily
on imported designs for its automobile production. Because
many of the components of the cars produced at FSO would be
locally made, cars from the FSO factory would be sold almost
39
tariff-free in Western Europe, allowing DM to bypass any future
attempts to shut out car imports from South Korea. 15
Consequently, the different viewpoint and approach of the
two automakers determined the outcome of the deal, and DM
was the victor. Considering the name value of the two
automakers in world automotive industry, DM’s FSO
acquisition against GM was an unprecedented event and a
major boon to DM. Indeed, after DM’s acquisition of FSO,
the market share of DM-FSO increased while the share of GM-
OPEL decreased. The rankings in Table 6 indicate ‘why DM
desperately wanted FSO to gain a foothold in the European
market after its split with GM’. It also shows how GM’s
failure to acquire FSO resulted in a decrease in its market
position in the Polish market.
15 “Mr. Kim’s One-man Empire” The Economist 27 Jan. 1996.
40
[Table 6] Market Share in Poland
Ranking Company Passenger’s Vehicle (%)
95. 6-7 96. 6-7 97. 1-6
1 Fiat 42.7 34.8 29.9
2 Daewoo-FSO 21.2 24.8 29.39
3 GM-OPEL 7.5 9.1 8.1
4 Renault 6.9 5.2 5.2
5 Skoda 3.5 4.4 5.9
Source: Reuters 21 Aug. 1997.
(2) Asia-pacific: Production in Indian Market (1995)
① Background
In the mid-1990s, GM and DM competed not only for the
Eastern European market but also the Asian market.
Considering the two automakers’ rush to enter emerging
markets, it is clear that their subsequent competition in India
was no coincidence. For DM, the Indian market held a critical
position in DM’s global strategy for reasons similar to those
that caused it to pursue the Eastern European market; latent
41
purchasing power and redundant labor at low cost.
Table 7 shows a brief history of DM’s presence in the Indian
market. The Indian government first allowed the production
of upper-medium vehicles by foreign automakers in 1994.
② Competition in detail
GM was one of the front-runners to enter the Indian market
and DM followed suit one year later. At that time, GM had a
newly renovated plant built by Hindu Motors. It was
purchased by GM India in 1995 and modernized for the
production of the Opel Astra and other future products. DM
managed to start production one year ahead of GM, however,
turning out a remarkable 25,000 units of the Cielo model in the
initial production. DM’s quick pace placed a burden on GM
from the very start of their competition in the Indian market.
42
[Table 7] Overview of DM’s Presence in India
Source: Joo-yong Park, “A Comparative Study on Theories of Direct Investment and
Cases at Daewoo Group; Focusing on Auto Industry,” Diss., Hankuk Univ.,
1999, 67-68.
1990 India opens its market after the collapse of Communism.
Indian government permits production of upper-medium vehicles. 1994
Opel, Honda and Peugeot SA planned production in India.
1994
DCM Toyota, a joint venture between India DCM and Toyota that
produced commercial vehicles, is renamed DCM Daewoo Motor after DM
purchases Toyota’s shares in the company.
1995 Production by DCM Daewoo Motor starts.
1995.7 Cielo produced by DCM Daewoo Motor.
Assembly plant with annual capacity of 100,000 opened.
DCM Daewoo Motor renamed ‘Daewoo Motor India’ after DM acquires
DCM's shares, giving 91.6% share to DM. 1997
Plant for core-parts opened.
43
(3) South Korea: DM’s Acquisition of Ssangyong Motor (1998)
① Background
While the previous two conflicts happened outside of the
domestic market, the takeover deal for Ssangyong Motors
represents a confrontation in the domestic market between DM
and GM. After its withdrawal from the South Korean market
in 1992, GM had been looking for any possibility to return.
② Competition in detail
As Jack Smith, CEO of GM, mentioned in an interview
with a Korean newspaper16,
“The Korean market is still attractive to GM. However, the
Korean market has been blocked to foreign automakers, unlike the
aggressive outward strategy of Korean automakers. We are
considering any form of investment like joint ventures with other
Korean automakers or R&D co-operative strategies like technological
licensing or marketing agreements.”
Proving his point, GM entered the negotiation process for
the acquisition of troubled Ssangyong Motor in 1996. At the
16 “GM Wants to Enter South Korean Market in Any Form of Business,” 「Hankuk Daily Newpaper」11 Apr. 1997.
44
time, Ssangyong suffered from heavy debts and its situation
offered GM a timely opportunity to return to the Korean market.
As part of GM’s initial approach to Ssangyong Motor, it teamed
up with a Chinese merchant group in May 1997 to raise around
300 million dollars in funds to be used to increase capital stock
of Ssangyong Motor17. With the announcement of the
investment plan, GM seemed to be on the right track to the
acquisition of Ssangyong. However, the American
automaker’s plan to return to the Korean market was once again
blocked by the DM. On December 8, 1997, DM announced its
plan to acquire Ssangyong Motor and successfully merged with
the ailing company in January of the following year. Through
the acquisition, DM effectively blocked GM’s entry into the
Korean market.
As a consequence of, the sudden death of its deal with
Ssangyong Motor, GM’s entrance into the Korean market was
indefinitely postponed. The South Korean government’s
involvement in the choice of DM over GM left the American
17 “Ssangyong Motor’s Fund Raising by Foreign Capital,” 「Segye Daily Newspaper」22 May 1997.
45
automaker with the impression that the Korean government was
not to be trusted. Through this experience, GM likely came to
believe that there was a ‘conspiracy’ to block foreign
automakers from entering the Korean market. This
diminished credibility of the Korean government in the eyes of
GM would later have an impact on the negotiations for GM’s
acquisition of DM.
4. M&A Negotiators (1999~2002)
46
1) Causes affecting transition from ‘Competitors’ to ‘M&A
Negotiators.’
In 1999, the relationship of GM and DM as ‘Competitors’
came to an end when DM’s parent company became weakened
in the aftermath of the South Korean financial crisis. If there
was competition within a certain degree of balanced power
between GM and DM after 1992, the power-balance was
permanently destroyed by DM’s troubles in 1999. Thus, their
relationship once more entered a new phase. The following
figure (Figure 5) shows the two main factors that influenced the
subsequent shift in the GM–DM relationship.
The first factor was the financial crisis in South Korea,
which led to the collapse of DM and brought pressure for reform
to meet foreign investors’ demands.
[Figure 5] R-O Model Analysis: from Step2 to Step 3
III. Accommodation
1999 ~ 2002
The Perceived Importan
• Financial Crisis of South Korea
• Increasing importance of Asia-Pacific
market in automotive industry (as well
as GM’s global goal)
47
The second was the increasing importance of the Asia-Pacific
market in the automotive industry as a growing market, which was
important for GM to gain sustainable growth in its global market
share. Thus, these two factors led GM and DM to the M&A
negotiation table. The shift in the two companies’ relationship can
be clearly observed in the negotiations for GM’s acquisition of DM.
On April 30th, 2002, GM signed a contract to buy the bankrupt DM.
GM’s deal with DM marked the end of even longer and more painful
process.
2) Negotiation process and critical events
48
[Table 8] The Chronology Negotiations for GM’s Acquisition of DM
1
Ongoing discussion for strategic alliance between GM and DM including transfer of
managerial control.
8 26 Daewoo group goes into 'workout' program.
12 13
GM Submits LOI on the terms of “private contract" to Financial Supervisory
Commission.
1999
12 M Announcement of Ford’s intention to participate in bid.
Invitation for bid is sent to potential applicants and letters of intent are collected.
2 14
(5 corporations: GM, FORD, European Daimler Chrysler, Fiat, Hyundai Motor)
3 6 First Due diligence from March 6 to June 9
6 26 Deadline for 1st proposal submission
6 29 Ford wins Exclusive right at $7billion.
7 10 Third due diligence from July 10 to Aug 19 by Ford.
9 15 Ford withdraws from acquisition negotiation.
10 7 GM-Fiat Consortium – Submits LOI (Letter of Intent).
10 17
New managers are inaugurated.
(Chairman: Lee Chog-dae, President: Lee Young-kug)
2000
10 31 Announcement of 'self-rescue program' with layoffs of 3,500.
49
First meeting of labor union and managers.
11 6 DM goes into 1st bankruptcy.
11 7 Third joint labor-management conference fails.
11 8 Daewoo Motor declares bankruptcy.
DM files for court receivership.
11 30
Court appointed manager: Chairman Lee Chong-dae.
12 15 Fundraising by state-run Korea Development bank (46.6billion Won) as financial aid.
12 16 Restructuring plan with job-reductions of 5,347 announced to labor union.
12 29
First board meeting by managerial reform commission – Plan to reduce 6,884 jobs
decided upon.
1 15 Letter proposing layoffs of DM operating workers submitted to Ministry of Labor.
1 E Korea Development Bank (KDB) agrees to inject new financing.
11th board meeting held by managerial reform commission.
2 12
Announcement of 1,785 job cuts and suspension of Pupyong I passenger vehicle plant.
12th board meeting is held by managerial reform commission.
2 16
1,750 employees laid off, Labor union goes on General strike.
2 18 Physical conflict between labor union and police.
4 Operating profit 6.7 billion won realized.
2001
5 29 Negotiations between GM and Creditors back on track.
50
30 GM submits proposal for acquisition to DM and KDB.
6 4
Meeting between GM and DM's creditors begins in H.K. (Lee Sung-keun chief
negotiator).
4 consecutive months of operating profits realized.
7
5.1 billion won in operating profits realized. It is the first time in three years.
8 16 DM submits corporate reorganization proposal to Incheon District Court.
8 30
Joint-proclamation of "No dispute and No strike" announced by labor and
management.
9 21 MOU (non binding agreement) signed with GM.
9 22 Due diligence.
11 12 Negotiation starts for collective labor agreement of DM.
11 27 Nick Reilly named manager of acquisition team which starts work on Jan. 1, 2002.
12 Annual operating profit 10.7 billion won realized.
12 M GM issues the possibility of contingent liabilities and asks for indemnity.
4 9 DM labor and management reach agreement to revise collective agreement.
4 15 DM submits revised "corporate reorganization form. 2002
4 30 Agreement reached for final formal contract for GM's acquisition of DM.
Note: Summary of online resources and newspaper articles.
(1) Ongoing discussion for strategic alliance (Jan. 1999)
51
Prior to entering real negotiations for GM’s acquisition of DM, an
MOU agreement for a strategic alliance was signed on Feb.2, 1998.
After a few years of competition, GM and DM were once again
attempting a strategic alliance, only this time the power situation had
changed due to the economic crisis in Asia. DM, like other South
Korean companies, was desperate to find a foreign partner with deep
pockets, whereas GM was gearing up to be in a ‘leading’ position in
the hope of finally playing a significant role in the Asian market.18
At that time, DM was seeking a rescuer. However, the alliance did
not last long for a variety of reasons19. If the strategic alliance had
18 Prabibha A. Dabholkar and Sabrina M. Neeley, op. cit., 453. 19 First of all, GM did not have complete faith in DM. Jack Smith, C.E.O of GM,
said in an interview in May 2000; ‘The negotiation for strategic alliance remained
deadlocked due to the lack of reliable financial documentation from DM.’ (「Weekly
Donga」Vol. 252, Sep. 2000.) DM argued that its net worth was ‘KRW5.1 trillion’
while GM estimated that it was ‘negative KRW6.1 trillion’ on its due diligence after it
signed off on the MOU for the strategic alliance agreement. Second, GM faced
internal problems. On June 5, 1998, UAW workers at two key plants in Flint,
Michigan, went on strike. GM’s North American vehicle production was shut down
until the strikes were resolved on July 28. (“General Motors home page 2003: GM
Corporate History,” http://www.gm.com/company/corp_info/history/gmhis1990.html )
In the meantime, GM needed to deal with other internal and external issues, such as
its participation in the public bidding for Kia Motor. These combined factors all
affected the pace of negotiations.
52
been successfully settled, DM might be in a different situation today.
Although the signing of the MOU for a strategic alliance did not
have any direct influence on further negotiations, it is clear, at least,
that GM was able to get ‘an idea of DM’s internal financial status’,
which may have turned out to be critical in future price negotiations.
(2) ‘Workout Program’ of Daewoo group (26 Aug. 1999)
Daewoo group went into a 'workout program.’
(3) GM’s submission of LOI (13 Dec. 1999)
GM submitted an LOI with the proposal of an "optional contract"
to the Financial Supervisory Commission.
(4) International public tender (Feb. 2000)
GM, Ford, European Daimler Chrysler, Fiat and Hyundai Motor
all applied to bid on DM.
(5) Ford’s retreat (15 Sep. 2000)
Due to a series of internal and external misfortunes, Ford pulled
53
out of the Daewoo deal.20 There were a number of reasons for
Ford’s decision.
First, the automaker had several internal problems at home.
There was a massive recall of Firestone tires21, whose shares were
plummeting, and the decision to spend billions in ‘dividends’ to its
shareholders. These internal issues alone were enough to make
Ford cautious about considering a deal with DM. Second, the most
likely reason Ford unexpectedly shrank back from Daewoo, was that
its due diligence was unearthing one problem after another at DM.
Insiders admitted that Ford was willing to spend well over the actual
value of the South Korean company because of the position of
strength it would thereby acquire in Asia. But the closer the Ford
team looked, the worse were the liabilities. In addition, the Korean
government rejected attempts to exempt DM’s factories from its
debts and other liabilities.
20 The following article is reorganized for this section; “Ford Misses Out Again,” The Economist 23 Sep. 2000. 21 ‘On Wednesday, August 9, 2000, Bridgestone/Firestone (Firestone) and Ford announced jointly that Firestone recall approximately 14.4 million tires that contain a safety-related defect: Most of the tires in question were original equipment on Ford vehicles, primarily the Ford Explorer, although a small number were used as original equipment on other manufacturers' vehicles, and they have been used as replacement tires on a wide variety of models.’ http://www.nhtsa.dot.gov/hot/Firestone/Index.html.
54
Thus, Ford pulled out of the Daewoo deal due to 1) its Firestone
scandal, and 2) DM’s troubled financial status. This later turned out
to be the main variance that directly affected the shift in negotiation
power from DM to GM. This event became the turning point that
determined the form of the final stage of the GM-DM relationship.
From that point on, the balance of power between GM and DM was
broken and GM led the negotiation for acquisition with no
competitors.
(6) Court receivership after Daewoo Motor’s bankruptcy (30 Nov.
2000)
DM went into the court receivership, and the court appointed Lee
Chong-dae as its manager.
(7) General strike in Pupyong plant (16 Feb. 2001)
The managerial reform commission held its 12th board meeting
and made the decision to layoff 1,750 workers. The labor union
opposed the decision and went on a general strike.
(8) Operating profit realization (Apr. 2001)
55
DM’s Pupyong plant realized an operating profit of 6.7 billion
Korean Won.
(9) Signing of MOU (Sep. 2001)
GM signed a non-binding agreement, or MOU, with DM.
(10) Agreement for final formal contract (30 Apr. 2002)
An agreement was reached for the final formal contract for GM’s
acquisition of DM.
3) Final formal contract between GM and DM and its terms
The final formal contract was signed on Apr.30, 2000 and GM
struck a good deal. Together with various partners, it got a 67%
stake in a new company, tentatively named GM-Daewoo. The
acquisition was a key part of GM’s global expansion. The company
had been trying to strengthen its foothold in Asia for some time.
Buying a presence in South Korea was seen as particularly urgent,
since imports accounted for only 3% of the 1.5 million cars sold in the
56
country each year. GM would use DM’s production lines to make
budget cars that could be sold under the ‘Daewoo brand’ in most
markets.22 The following table shows the contract terms in detail.
The term differences between the MOU and the final formal contract
are also shown.
(1) Capitalization and equity holding
The newly established company was capitalized through cash
contributions of $40 million from GM and its participating business
partners, and $197 million from DM creditors for ownership stakes
equaling 67 percent and 33 percent respectively. In return for the
creditors’ contribution of selected Daewoo automotive assets, it was
agreed that the new company would issue to creditors a long-term
redeemable preferred equity with a face value of $1.2 billion and an
average annual coupon rate of 3.5 percent.
[Table 9] MOU and Final Formal Contract Terms
MOU A final contract Remark
22 “One Step Forward, One Step Back," The Economist 4 May 2002.
57
Term Preferred stocks Preferred stocks
Amount
US$1.2billion
acquisition deal for
bankruptcy
US$ 1.2 billion
Price
Debt
Acquisition of
US$573 million in
debt
Reduction of debt and
corresponding reduction
of affiliate acquisitions
Sales 22 9 Acquisition list
(Overseas
corporations) Production 2 1
Reduced
Number of acquired
units
Conditions
Required to decide on
takeover within 6 years
- Impossible to
calculate depreciation
cost
Duty to be owed for
early acquisition
when required
conditions are met. A
long-term supply
contract to be
maintained with an
annual average
depreciation cost of
US$ 19.7 million
Duty to be owed for early
acquisition and no-change
for rental and the
depreciation cost
Pupyong plant
Job security
guarantee -
Maintenance of recent
model cars,
development of
substitute cars,
strategies to decrease
employment
prohibited
Consideration of job
security of employees
58
Indemnity for 'Contingent debts' To be regulated in a
formal contract
US$297 million
deposit
Establishment of a limit
and easing of burdens
Tax break (Suspension of special
excise tax)
Deadline grace period
of 9 months for 5 years
payment
Deadline grace period
of 6 months for
3years payment
Reduction of grace period
Note: Assembled and summarized with the online resources and newspaper articles.
(2) Acquired assets by GM
The assets contributed to the new company included a total of nine
overseas subsidiaries and three manufacturing plants. The sales
subsidiaries included those in Austria, the Benelux countries, France,
Germany, Italy, Puerto Rico, Spain and Switzerland plus Daewoo's
European parts operations in the Netherlands. The manufacturing
plants were the Changwon and Gunsan plants in South Korea, and
the automobile operations plant in Hanoi, Vietnam.
The manufacturing facility in Pupyong, South Korea, remained
open and continued to supply the new company with vehicles,
engines, transmissions and components for at least six years. The
agreements gave the new company the option to acquire the plant
any time within the subsequent six years.
59
(3) Brand positioning
It was agreed that the new company would continue to use the
Daewoo brand in Korea, in countries where overseas subsidiaries
were acquired such as those in Western Europe, and in certain
countries with independent distributors. In addition, the new
company’s products would be exported to new markets, such as
Mexico and use established GM or GM-affiliated brands. Final
branding and distribution plans were announced after the transaction
closed.
(4) Liabilities
The new company also assumed US$573 million of primarily
operating liabilities. It also acquired inventories associated with the
acquired assets with a value of US $385 million. Long-term
committed working capital facilities of US$2 billion were provided
to the new company by the South Korean creditors. Provisions
were made to ensure that Daewoo’s existing customer warranty
obligations were satisfied following completion of the transaction.
(5) Other overseas facilities
60
For those overseas DM manufacturing facilities that were not
acquired by the new company, several continued to supply parts,
components and technical assistance to the new company for a
period of time. Many of the existing sales subsidiaries in Western
Europe were acquired by the new company. In the United
Kingdom, the sales subsidiaries were acquired, however, and a new
sales operation needed to be created. The distribution set-up in
other European markets, which had been handled by independent
importers, came under review with the intention to establish a
European Operations Center to direct and coordinate business in
Europe.
(6) Management
Nick Reilly was chosen to serve as president and chief executive
officer of the new company. In the interim, a transition team
consisting of Daewoo management, and management personnel from
GM and its business partners was appointed to ensure a successful
startup after closing. Employment levels in Korea were set to
remain at the same levels.
61
(7) Remarks
Other facilities, subsidiaries, ventures, debts and liabilities not
included as part of the definitive agreement remained the
responsibility of the existing Daewoo Motor Company.
The new company would have annual revenues of about US$5
billion and would own and operate selected domestic and foreign
assets of Daewoo Motor Company. This transaction resulted in the
establishment of a well-capitalized company with strong financial
flexibility. Both partners were committed to ensuring that DM
would be transformed into a viable and competitive automotive
enterprise. The transaction allowed the creditors to participate in the
success of the company while also enabling GM to achieve its
strategic objectives of gaining access to the Korean market and
acquiring a strong portfolio of highly cost competitive vehicle
platforms, in support of global strategic initiatives. 23
3) Analytical approach
23 “Uri Gorbatov, GM, Daewoo Motor Company and Creditors: Reach Preliminary”
http://www.carseverything.com/content/news/manufacturers/Daewoo.
62
From 1999 to 2002, the relationship of GM-DM evolved into one of
‘accommodation,’ considering a high degree of perceived relationship and
a low degree of perceived outcome. While there were ups and downs on
the way to the final agreement, GM conceded at least a portion of its pie
in order to reach the final agreement. If GM had used too much pressure
to gain more in the final step of the process, the result could have been a
negative influence on its future dealings in the Korean market. Instead,
GM sacrificed a portion of its outcome to maintain a certain degree of
relationship. Thus, the final pattern of their relationship can be defined
as ‘accommodation.’ In sum, the changing relationship between GM
and DM can be depicted from ‘Collaboration’ through ‘Competition’ to
‘Accommodation.’ (See Figure6)
[Figure 6] R-O Model Analysis from 1972 to 2002
III. Accommodation
1999 ~ 2002
I. Collaboration
1972 ~ 1992
II. Competition
1993 1998
The Perceived Importance of Relationsh
Negotiation Process
For Acquisition
63
IV. ASPECTS OF CONSIDERATION FROM
THE HISTORICAL RELATIONSHIP OF GM
AND DM
In the previous chapters, the overall pattern of the GM–DM relationship
64
was divided into three parts: 1) partnership, 2) competitors and 3) M&A
negotiators. The GM - DM relationship initially started as a form of joint
venture for mutual gain so it can be considered a ‘partnership.’ After the
partnership fell apart, the two companies became ‘competitors’ in emerging
markets. During this period, GM faced a series of challenges from DM.
Finally, they faced each other at the M&A negotiation table as ‘Negotiators.’
As negotiators, DM was weakened by a series of internal and external factors,
so GM was able to gain a relatively favorable position. This chapter will
point out some issues for consideration that may provide clues to understand
the shifting relationship of GM and DM from 1972 to 2002. In addition, it
may be possible to draw some lessons from these issues.
1. Shifts in the Balance of Power
In the same sense as the R-O model, the ‘Interdependency Cube’ can
be applied for the three stages of the relationship between GM and DM.
As mentioned in the earlier introduction of this model, the
‘Interdependency Cube analysis’ is limited to the long-term view of the
65
GM–DM relationship for this study. Thus, the variables to determine
positioning changes in their relationship can be seen according to two
factors; 1) the ‘balance of power grid’ depicting balanced or unbalanced
power, and 2) the ‘orientation grid’ showing individual or joint
orientation. This tool is especially useful in depicting the power shift
between GM and DM over the whole period of their relationship.
The three periods can be named ‘Keiretsu,’ ‘Divergent,’ and
‘Command’ using the terminology of the ‘Independency Cube model’.
The first period, from 1972 to 1992, can be seen as a ‘Keiretsu’
relationship. GM formed its initial relationship with DM according to
its own preferences, with DM serving as a sub-plant. However, both
companies emphasized joint goals under the condition of balanced power.
The second period, from 1993 to 1998, can be characterized as
‘Divergent.’ In this period, after their partnership came to an end, GM
was no longer able to lead a favorable position. Despite the existence of
an indirect relationship, GM and DM appeared to head along divergent
goals and seek gains through competition in emerging markets.
In the final period, from 1999 to 2002, GM was able to gain the
‘Command’ position. Although there were some concessions in the
66
final stage of the negotiation, GM generally led the negotiation of
acquisition and successfully maximized its gain. Thus, the analysis of
the changing pattern of the GM-DM relationship according to the
Interdependency Cube framework can be seen in the following figure 7.
These three types of relationships represent the character of power
relationships between business partners and competitors. If there is a
shift in a power relationship, the type of relationship shifts as well, along
with the strategies used in dealing with a counterpart. When DM broke
out of the ‘Keiretsu’ relationship by acquiring full ownership of itself, the
GM-DM relationship changed to ‘Divergent.’ The strategies employed
by the two companies were then focused on competition. After the
Asian financial crisis and the bankruptcy of DM in 1999, their
relationship again changed, this time to ‘Command,’ and once more their
individual strategies changed accordingly.
[Figure 7] Interdependency Cube Analysis
III.
Command
(1999~2002)
I. Keiretsu
(1972~1992)
II.
Divergent
Coordinative
Unbalanced
Power
Balanced
Power
67
While GM was prepared to adopt the appropriate strategies for the shift in
its relationship with DM, however, DM failed to do likewise. As relationships
and power balances are in a continuous state of flux, it can thus clear
businesses should be prepared ahead of time for a variety of future power
shifts.
[Table 10] Overview with Analytical Frameworks
R-O Analysis I/C Analysis Period Historical Events
1972 GM Korea established.
1976 11 Renamed Sae-han Motor.
1978 Daewoo group involved in the acquisition of Sae-han
with GM.
1978 7 Partial managerial control acquired by DM.
Collaboration Keiretsu
1982 12 Renamed Daewoo Motor.
68
1992 10 Joint-business terminated.
1995 7 India: Production of Cielo started.
1995 11 Acquisition of Poland FSO by DM. Competition Divergent
1998 9 Acquisition of Ssangyong Motor by DM.
1999 8 Daewoo entered ‘workout program’.
1999 12 Public bidding for DM sales.
2000 9 Ford's retreat.
2001 9 Signing of MOU.
Accommodation Command
2002 4 Signing of final formal contract.
Table 10 is included to help draw a clear understanding of the overall
relationship shift between GM and DM within the frameworks of the R-O
model and the Interdependency Cube model. For each stage of the GM-DM
relationship, the corresponding categories depicted in the two models are
shown.
2. The Superior Negotiation Know-how of GM from
1999 to 2002
In the third, or ‘Command’ stage of the GM and DM’s dealings, the
most noteworthy aspect their relationship can be found in GM’s
remarkable negotiating style. GM’s strength was in its well-
69
organized negotiating strategy, while DM’s greatest weakness came
from the Korean negotiators themselves. South Korea’s negotiators
are often inexperienced in the merger process in cross-border
negotiations, and the GM-DM negotiations were no exception.
Instead of looking for ‘win-win’ propositions, say their western
counterparts, they often approach all talks as a ‘zero-sum game’. In
addition, during the negotiation process with GM the Korean team
frequently changed its negotiation team managers. This made it
difficult for the team to adopt a steady negotiation strategy.
1) Skillful negotiator24
Compared to DM’s negotiation team, GM’s was well
organized and highly efficient in the process of M&A
negotiations. GM showed its wisdom and experience in
dealing with other cultures in its choice of one member of the
24 Special reporting team of the Korea Economic Daily, 「The Secret of Collapse of
Daewoo」(Seoul: The Korea Economic Daily, 2002) 224-225.
70
team in particular, Alan G. Perriton, who was uniquely suited for
the job. Perriton was not only a skilled negotiator, but through
many years of working and living in Korea, he was also an
expert on Korean society. As a manager of GM, he was deeply
involved GM's Northern East Asia market. He was an original
member of the GM-Korea joint venture established in 1972.
His relationship with Korea began when he was just nineteen
years old, serving as a missionary in Seoul. Alan G. Perriton,
GM’s ‘prepared expert,’ entered an important role in readying
GM for its dealings with DM. For example, GM had already
gathered accurate surveys and data regarding the internal
processes of DM before entering into dealings with the South
Korean carmaker. The takeover prices offered by GM reflected
careful analysis of issues such as DM’s internal management
situation, its expected productivity after acquisition, its market
value and its financial accounting status, among others. Ford,
on the other hand, had to withdraw its bid due to a lack of
internal research into DM's real status.
Additionally, GM didn’t withdraw its negotiation team from
Seoul when it appeared that the chance to acquire DM had been
71
lost. It believed there was a good possibility that GM would
have another chance to return to the negotiation table25 even
though Ford had won exclusive rights to DM in international
bidding. This belief proved prescient when Ford announced its
withdrawal three months later.
GM’s use of a negotiator with a broad knowledge of Korean
society, business methods and structures was a key element in its
success in the negotiation process.
2) Adoption of appropriate tactics
GM adopted appropriate tactics at each stage, while the
members of the Korean negotiating team (and the interest
groups they represented) struggled among themselves.
(1) Delay
GM's most significant negotiation tactic was to constantly
25 Ibid. 221.
72
delay the final deal. It never hurried. After Ford’s
withdrawal, GM fully recognized that it was the only suitable
negotiator for the deal. As time went by, GM was able to take
over DM at a cheaper price under better conditions.
The first delay occurred during the period from September
2000, when GM first submitted its LOI, to the end of May 2001,
when DM realized its first operating profit for the previous three
years. While GM communicated its intention to takeover DM
to the Korean negotiation team after Ford’s retreat, it took no
actual steps in that direction. It waited until the company’s
self-rescue program had made significant progress through pay
cuts, job reduction, cleansing of bad assets, disposal of assets
and cost cutting. It is highly probable that GM waited until a
deal could be made in which burdens from loss-making
operations, non-performing assets and liabilities had already
been taken care of.
GM continued employing delay tactics right up until the deal
was finally sealed. In the time between the signing of the
MOU and the signing of the final formal contract, ‘labor
management friction’ was a major issue. GM dragged its heals
73
until the labor conflict was resolved by the joint labor-
management conference on the early April, after which it
committed to the final agreement.
By adopting delay tactics, GM was able to acquire DM under
much more favorable terms and without any major sacrifices.
(2) Cherry picking: reduction of takeover objects
In its MOU, GM originally agreed to take over two overseas
manufacturing plants and twenty-two sales distribution units.
In the final deal, however, GM took over just nine sales
distribution units and 1 manufacturing plant with higher market
values. (See figure 8) By cutting unstable facilities out of the
deal, GM was able to reduce its risk.
[Figure 8] Cherry-picking Acquisition by GM
1999
Overseas assets
▪ Sales distribution
center : 33 units
▪ Plants : 3 units
MOU (9.2001)
Overseas assets
▪ Sales distribution
center : 22 units
▪ Plants : 2 units
Domestic asets
▪ Plants : 2 units
Final Contract (4.2002)
Overseas assets
▪ Sales distribution
center : 9 units
▪ Plants : 1 units
Domestic asets
▪ Plants : 2 units
74
Source: Se-young Ahn, op. cit., 607.
GM provisionally took over the Pupyong manufacturing plant
under specific conditions. DM’s Pupyong plant would
continue operations and supply the new company with vehicles,
engines and components for at least six years. GM agreed to
buy the plant within that period if it met certain terms, such as
two-shift production, at least 4 percent annual capacity
improvement and the ability to meet product quality standards.26
With that option, GM was able to diversify its production line
without bearing potential risks.
(3) Good bargaining with big discounts
According to the deal, GM and its partner companies invested
US$400 million to hold a combined 67 percent of a newly
established company to which DM would sell three key
manufacturing plants (two in South Korea and one in Vietnam)
and nine sales subsidiaries in Puerto Rico and European
26 Yonhap 30 Apr. 2000.
75
Countries, including Austria, France, Germany, Italy, Spain,
Switzerland and the Netherlands27. The completed takeover
price came to $1.77 billion, including the acquisition of $573
million in debt.
After DM’s bankruptcy on August 26, 1999, the Korean
government estimated the automaker’s value between US$3
billion and $ 4 billion. Initially GM bid $5.5 billion and Ford’s
price followed at $7 billion. Through several adjustments, the
final takeover price was settled at $1.2 billion. (See Figure 9)
Over the course of the negotiations, the price of DM had fallen
by $4 billion from GM’s initial offer. The price gap was even
larger if the highest price, the $7 billion offered by Ford in
international bidding, is considered. As a whole, GM took
over DM for less than one fourth of its initial asking price.
[Figure 9] Price Change for DM’s Acquisition
27 Hindu Newspaper 1 May 2002.
76
55
70
40
12 8.54
0
10
20
30
40
50
60
70
80
Dec.19
99(G
M)
Jun.2000
(Ford)
Jun.2000
(GM
)
Jun.2000
(GM
)
Dec.20
01(G
M)
Apr.200
2(GM)
Date(Month/Year)
Pric
e(U
S$10
0mill
ion)
Note: The raw data for graph is from
Se-young Ahn, 「Global Negotiation Strategy」(Seoul: Pakyoungsa, 2003) 606.
3. The Typical Obstacles Blocking Korean Firms in
International Business Working with Cross-border
Partners
1) Conflicts among interest groups
77
The following points generally appear as obstacles whenever
Korean firms deal with cross-border partners. Although the details
of this section are drawn from GM and DM’s dealings, they are
relevant applicable to many Korean firms.
(1) Government
When considering whether to sell off DM at a rock-bottom price,
the Korean government faced a thorny dilemma. On the one hand,
selling the embattled carmaker to GM at a bargain price would send
a clear message to other chaebol that they might wind up selling
their assets cheaply unless they immediately implemented serious
reforms. On the other hand, the government would have to spend
billions more in taxpayer money to rescue the banking sector. Thus,
inside the Korean government, there was conflict between the
Ministry of Commerce and Ministry of Commerce, Industry and
Energy.
(2) Media
Since the GM-DM deal would have a significant impact on the
South Korea economy, the media closely followed every step of the
78
negotiation, and its reportage of rumors and speculations did nothing
at all to help the progress of talks. The already hostile public mood
was often further agitated by sensational news reports and leaks.28
(3) Labor unions
Labor unions also didn't help the negotiation progress by holding
violent protests against the GM takeover, which they feared would
lead to mass layoffs. Moreover there were conflicts among three
separate labor unions after the MOU agreement, in which GM agreed
only to takeover DM’s Gunsan and Changwon factories. (See earlier
figure 8)
(3) Creditors
The State-run Korea Development Bank - Daewoo's main creditor
bank - also differed with the labor unions. All of the conflicts
among different interest groups hindered the negotiations and made a
successful outcome more difficult. Figure 10 depicts the conflicts
among relevant interest groups.
28 “Dead Deals Walking,” The Economist 9 Feb. 2002.
79
2) Korean Culture: Xenophobia
The nature of Korean culture was also a kind of hindrance in the sale
of DM. Based on concepts such as “face” and “shame,” it offers no
rewards for risky decisions that turn out well, but punishes – with jail, in
some instances – those that turn out badly. Negotiators therefore have
little incentive to fight for the best deal. One who experienced this
personally is Hogeun Oh, who chaired DM’s restructuring committee.
Seen by foreign investors as one of South Korea’s bravest and best
negotiators, Oh was mauled in the local press for being easy in foreigners.
He said in his interview with ‘the Economist,’ “Afterwards, they can
always say that you could have done better, and there is no defense”. 29
29 “Dead Deals Walking,” The Economist 9 Feb. 2002.
80
DM’s Negotiation Team
GM’s Negotiation Team
Official Dispute
Inside Outside
OutsideInside
ProsC
onsPros
Cons
• Labor Union in Chanwonand Gunsan
• Labor Union in Pupyong • Ministry of Commerce, Industry and Energy• Politicians• Regional Society• Media
Internal Dispute
• CEO: Rick Wagoner• GM’s Asia-Pacific Segment
• Financial Department of GM• GM’s Plants in U.S.A.
• FIAT• MARUTI• OPEL
Internal Dispute
• Creditors: KDB etc• Financial Supervisory Service
• Ministry of Finance and Economy
Note: Depicts data collected online and from newspapers and journals
[Figure 10] Conflicts among Interest Groups
81
V. CONCLUSIONS
The history of GM is often called ‘the history of a century of M&As .’
Before being acquired by GM, the current sub-divisions of GM, such as
Cadillac, Buick, Oldsmobile, Pontiac, and Chevrolet, were all once its
competitors. Suzuki and Saab were recently added to the list and DM has
followed the same path. Although DM started its business through a form of
joint venture with GM, it aggressively expanded its economy of scale through
M&As in the mid 1990s, just as GM did. For a while, DM achieved
remarkable success, but in the end it came to the same fate as so many of
GM’s other competitors.
In this study, the changing patterns of the relationship between GM and
DM are defined as three stages that are considered according to the perceived
importance of outcome and relationship; 1) partnership (1972-1992):
collaboration, 2) competitors (1993~1998): competition, and 3) M&A
negotiators (1999~2002): accommodation.
Although there were ups and downs for both GM and DM since their initial
82
joint business in 1972, GM achieved its original goal – to produce sub-
compact cars in Korea with a target of further business in the Asia-Pacific
market - by acquiring DM. The path of the relationship between GM and
DM can offer valuable lessons to Korean companies that are willing to
promote their businesses through cross-border partnerships.
First, ‘building credibility’ should be the number one consideration if long-
term relationships with its cross-border partners are to be maintained. This
need for credibility extends to the partners’ government. Like organic
bodies, corporations have life cycles, as do their partnerships and
relationships. It is difficult to maintain a static or specific type of relationship
for very long. Over a three-decade period, the relationship between GM and
DM took several forms. Starting from a position of partnership and relative
trust, the two companies became fierce competitors in emerging markets, but
when GM was abruptly cut out of the running for the acquisition of
Ssangyong Motor in 1998, both DM and the Korean government lost their
credibility with GM. Later this loss of credibility returned as an obstacle to a
final agreement in the GM-DM takeover negotiations from 1999 to 2002.
For example, GM asked for a far lower price than the fair market value for the
acquisition of DM and required indemnity since it had doubts about accuracy
of the DM’s financial statement and inconsistent stance of the Korean
83
government. A partner of today can be a competitor of tomorrow.
Building credibility is a minimum safeguard to prepare for future relationship
shifts.
Second, Korean companies need negotiators who are skilled at seeing the
big picture, anticipating the strategies of their counterparts and developing
countermeasures and alternative strategies. The fact is that a ‘lack of
negotiation skills’ has been repeatedly pointed out whenever the dealings of
Korean firms or the government enter international negotiation stages. A
similar criticism was also observed in the GM-DM case. While GM utilized
experts on Korea and employed appropriate tactics in each round of
negotiations, DM and the Korean government failed to apply a single
consistent strategy and expended too much of their energy struggling with
internal interest groups. In addition, there was not even a serious discussion
about BATNA (Best Alternative To a Negotiated Agreement) among the
interest groups. As R. Fisher and W. Ury, professors of Harvard University,
mentioned, better alternatives can create stronger negotiation power to reach a
better outcome. If there had been more active discussions about BATNA,
the final negotiations between GM and DM might have yielded better results
for DM.
84
Third, a successful cross border deal is impossible if there is not sufficient
understanding or knowledge of the partner being dealt with. They are never
built in a day. In GM’s case, it took a ‘gradual approach.’ As it did with
other companies that later became its subsidiaries, GM started its initial
relationship with DM from partial equity participation. Then, it moved
forward to acquire DM after years of experience with it. This method is a
cautious way of gaining immediate benefits while uncovering the risks and
benefits associated with an investment partner. If close attention is paid to
DM’s aggressive investment in emerging markets during the mid-1990s, it
becomes clear that DM did not hesitate to invest in new markets and
proceeded with a boldness that sometimes came close to recklessness. For
example, DM built sales distribution centers through direct investment in 40
countries in just 5 years. At that time, those assets in new markets were
obtained by exchanging unknown potential risks. In hindsight, it is plain that
DM overestimated the growth rate of emerging markets. As a result, the
operating rates of its plants in emerging markets marked low degree in 1997;
60% in Poland, 22% in Uzbekistan, 24% in Romania, and 11% in India. It is
obvious that its sudden expansion contributed to the collapse of DM. Thus,
GM’s cautious investment strategy, its step-by-step approach over the long-
85
term, is the more appropriate way to effectively eliminate obstacles that can
result from gaps between different companies and cultures.
Although systematic risks cannot be totally controlled by Korean corporate
managers, the pattern of the changing relationship between GM-DM shows
that they can minimize these risks by 1) building credibility with business
partners, 2) developing negotiation strategies with BATNAs and 3) investing
gradually in target markets. In this way, they can increase the outcome of
international business with their cross-border partners.
86
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APPENDICES
[Table 11] Global Vehicle Production and Sales by Manufacturer30
Global Vehicle Production Global Vehicle Sales
2002 2001 2000 2002 2001 2000
General Motors 8,276,000 7,786,000 8,494,000 General Motors 8,504,434 8,564,480 8,596,347
Ford Motor Co. 6,973,000 7,008,000 7,424,000 Ford Motor Co. 6,819,594* 6,906,548* 7,150,711*
Toyota Motor Corp. 6,309,616 5,848,094 5,888,260 Toyota Motor Corp. 6,167,703 5,927,568 5,703,446
Volkswagen AG 5,023,264 5,107,945 5,156,455 Volkswagen AG 4,989,030 5,080,087 5,165,000
DaimlerChrysler AG 4,471,900 4,424,200 4,677,894 DaimlerChrysler AG 4,540,900 4,498,800 4,749,000
PSA/ Peugeot-Citroen SA 3,262,100 3,136,300 2,877,400 PSA/ Peugeot-Citroen SA 3,267,474 3,132,800 2,815,700
Hyundai Motor Co. 2,913,726 2,517,719 2,545,958 Hyundai Motor Co. 2,939,499 2,652,509 2,533,243
Honda Motor Co. 2,900,787 2,651,661 2,485,213 Honda Motor Co. 2,820,000 2,670,000 2,540,000
Nissan Motor Co. 2,690,295 2,466,995 2,605,155 Nissan Motor Co. 2,735,530 2,580,328 2,629,044
Renault SA 2,343,954 2,375,084 2,444,370 Renault SA 2,403,975 2,413,038 2,438,256
Fiat S.p.A. 2,159,936 2,391,719 2,733,015 Fiat S.p.A. 2,079,336 2,292,858 2,646,500
Mitsubishi Motors Corp. 1,822,644 1,668,286 1,813,586 Mitsubishi Motors Corp. 1,847,800* 1,698,371 1,665,617*
Suzuki Motor Corp. 1,798,089 1,619,304 1,771,113 Suzuki Motor Corp. 1,707,392 1,587,780 855,695
BMW Group 1,090,258 946,730 834,519 BMW Group 1,057,344 905,657 822,181
30 Notes: *Automotive News estimates
**Global production and sales shown are through Sept.2002
Production includes minivehicles, passenger cars, light, medium and heavy
commercial vehicles and buses; includes vehicles produced for sale by other
manufacturers.
Sales includes minivehicles, passenger cars, light, medium and heavy
commercial vehicles, and buses
93
AutoVaz 803,498 768,030 705,561 Mazda Motor Corp. 964,800* 968,324 1,009,912
Mazda Motor Corp. 773,798 868,757 932,160 AutoVaz 640,000 775,612 698,832
Fuji Heavy Industries Ltd. 541,018 568,870 581,368 Fuji Heavy Industries Ltd. 554,911 570,816 582,199
Isuzu Motors Ltd. 455,615 454,553 566,874 Isuzu Motors Ltd. 456,119 461,116 582,651
Daewoo Motor Co. 316,639** 522,375 997,444 Daewoo Motor Co. 317,251** 502,701 972,247
First Automotive Works(FAW) 309,625 216,549 340,131 First Automotive Works(FAW) 356,018 250,623 351,791
Proton 231,775 233,297 188,603 Proton 214,985 209,514 182,300
TELCO 207,508 179,021 181,093 TELCO 204,868 172,667 181,179
AutoGaz 198,135 191,492 227,673 AutoGaz 194,000* 198,654 222,400
SsangYong Motor Co. Ltd. 161,016 125,026 - SsangYong Motor Co. Ltd. 161,042 125,440 -
Volvo Truck Corp. 160,800* 158,000* 93,000* Volvo Truck Corp. 157,133 155,311 81,826
Paccar 92,300 78,700 102,400 Paccar 92,300 78,700 102,400
Navistar International Corp. 86,000* 85,794 118,520* Navistar International Corp. 88,400* 94,064 119,705*
Mahindra & Mahindra 72,320 62,020 67,006 Mahindra & Mahindra 70,166 63,612 67,052
Porsche AG 57,004 56,154 50,848 Porsche AG 55,124 54,787 50,096
MAN Nutzfahrzeuge Group 53,800 66,250 65,100 MAN Nutzfahrzeuge Group 53,900 68,850 64,550
Scania 45,145 48,129 55,581 Scania 43,669 48,331 56,492
Ashok Leyland 32,643 32,174 34,524 Ashok Leyland 33,444 30,706 34,543
Nissan Diesel Motor Co. 26,761 24,142 25,661 Nissan Diesel Motor Co. 28,669 26,205 27,905
Hindustan Motors Ltd. 23,750 24,063 29,568 Hindustan Motors Ltd. 23,366 24,300 29,231
Eicher Motors 12,442 9,197 8,036 Eicher Motors 12,261 9,046 8,050
Bajaj Tempo Ltd. 8,737 6,860 9,359 Bajaj Tempo Ltd. 8,662 7,648 8,714
Source: “Automotive News Data Center and Marketing Systems GmbH” 「Market
Data Book」2003.
94
[Table 12] General Motors’ Global Brand Positioning
Fiat Pontiac Buick Cadillac Saturn GMC Opel Saab Isuzu Suzuki Subaru
U.S.A ● ● ● ● ● ○ ○ ○
Mexico ● ○ ○
Brazil, Argentina ● ○ ○ ○
Western Europe ● ○ ● ● ○ ○ ○
Eastern Europe ● ● ● ○ ○
Japan ○ ● 2000 ● ● ● ○ ● ● ●
ASEAN ○ ○ ○ ○ ○
Australia ○Alfa ● ○
China ● ○ ○ ○
Taiwan ○ ○ ○ ○
India ○ (●Marui)
Remark ● This denotes major markets including home market and strategic base or brand.
Source: A&D Consultants, “Special Report for GM,” 「Monthly Report on the
Global Automotive & Its Corporation Industry」Vol. 21. Sep. (2001): 83.
[Table 13] Overseas Affiliates of Daewoo Motor
Subsidiaries Branches R&D Center Total
Automotive industry 60 1 2 63
Source: Joo-yong Park, 「A Comparative Study on Theories of Direct Investment
and Cases at Daewoo Group」quoted in “Daewoo Managing Department for
Overseas Business”, 1997.
95
[Table 14]
Overseas Production Plants of Daewoo Motor and Capacity
Passengers’ Vehicle Commercial
Vehicles
Opened Month for
operation Total
Poland 500,000 170,000 96 Mar 670,000
Ukraine 255,000 - 98 May 255,000
Uzbekistan 150,000 50,000 96 Mar 200,000
Czech - 25,000 95 Nov 25,000
Iran 25,000 - 96 Oct 25,000
Egypt 24,000 - 98 Sep 24,000
Romania 200,000 - 96 Mar 200,000
India 160,000 10,000 95 Jul 170,000
Vietnam 28,000 2,000 95 Mar 30,000
Indonesia 5,000 - 95 Jul 5,000
Philippines 10,000 - 97 Sep 10,000
China (Bus) - 5,000 94 Aug 5,000
Total 1,357,000 262,000 - 1,619,000
Source: Joo-yong Park, 「A Comparative Study on Theories of Direct Investment
and Cases at Daewoo Group」51, quoted in “Discover Daewoo,” 「Daewoo
Development of Human Resources」1998.
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