The Fall of Daewoo Motors*

            


Details

Case Code : CLBS030
Publication date : 2004
Subject : Business Strategy
Industry : Automobile
Length : 04 Pages
Price : Rs. 50

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Key words:

brand image, corporate governance, trade union, acquisition, Daewoo group, Kim Woo Choong, KIM


* This caselet is intended for use only in class discussions.
** More comprehensive case studies are priced at Rs.200 to Rs.700 (US $5 to US $16) per copy.

 


Abstract: ICMR India ICMR India ICMR India ICMR India RSS Feed

The caselet examines the problems faced by South Korea-based Daewoo Motors, the flagship company of the Daewoo Group. Daewoo Motors expanded rapidly in several risky and uncertain markets by taking huge debts.

Issues:

 » The major flaws in Daewoo’s expansion strategy and their consequences
 » Impact of the international expansion strategy on the Daewoo Group and Daewoo Motors’ financial performance.

Introduction

In the late 1990s, the leading South Korean car manufacturer, Daewoo Motors (Daewoo), was in deep financial trouble. For the financial year ending 1999-2000, Daewoo generated revenues of $197.8 million and net loss after tax of $10.43 billion.


The company's revenues had dropped by 94 percent since 1999. The loss was regarded as South Korea's largest ever corporate loss. Apart from this, the company's domestic market share came down to 23 percent in 2000 from 33 percent in 1998. According to analysts, borrowings by the company for its expansion programs were considered the reasons for the losses....

Questions for Discussion:

1. In 1999, Kim Woo Choong (KIM), the founder of the Daewoo group, came up with a restructuring plan. He planned to sell about $7.5 billion worth of assets of other companies of the group and concentrate on the automobiles and finance business. Kim planned to sell Daewoo Group's shipyards to a Japanese company. Kim also planned to exchange the Group's electronics business for Samsung Group's car division. What could be the reasons behind Kim's decision to sell Daewoo Group's shipyards and electronics?

2. GM had expressed interest in Daewoo at a time when most automobile manufacturers had shown disinterest towards Daewoo. Explain why GM was interested in Daewoo and how Daewoo will benefit after being acquired by GM?