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Korean Turnaround Tales

2 minute read
Michael Schuman

There isn’t much good news from General Motors these days. Its once dominant U.S. market share is slipping. Steel and labor costs are mounting. Profits are evaporating. But there’s an unexpected bright spot in Asia: GM’s South Korean unit, GM Daewoo Auto & Technology. In 2002, GM and its partners acquired the choicest assets of bankrupt Daewoo Motor for $440 millionand it looked like they overpaid. Daewoo’s market share in Korea was shrinking and its factories were running at half their capacity. Union members tried to thwart the deal by rioting around the main factory near the port city of Inchon.

But Daewoo, under CEO Nick Reilly, is now being resurrected as a low-cost manufacturing base for GM’s own brands and for those of its Japanese partner Suzuki. In the U.S., Daewoo makes the compact Chevrolet Aveo and Suzuki Forenza, and it also exports to China, India, Latin America and Europe. In 2004, the company produced 900,000 carsthree times the output when GM took overand this year, Reilly expects sales to top 1 million. Daewoo’s work force has increased by 4,000 in the last two years.

Reilly’s work, though, is far from finished. Daewoo had a loss of $70 million last year and its market share in Korea remains flat at about 10%. Reilly says he’s tackling these problems by investing $2.5 billion to refurbish his factories, revitalize research and development, and create new models. Early next year, Daewoo will launch the first SUV designed by its own engineers. “We’ve made a lot of progress,” says Reilly. A full turnaround “shouldn’t be that far away.” For GM’s sake, he’d better be right.

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