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GM Daewoo comes back to life

With the recent ending of a long period of uncertainty defined by major cash flow concerns and falling vehicle sales in its home market, GM Daewoo (GMDAT) is beginning to look like a sustainable business again.

One year ago GMDAT was in limbo, having waited over four months for an answer to its urgent request for Won 1tr in refinancing from the Korea Development Bank. Twelve months on, an early repayment of Won 250bn for a revolving credit facility has just been made, GMDAT president and chief executive Mike Arcamone attributing this to cost cutting and improved vehicle sales.

Sales may well be on the rise, but Daewoo all but missed an incentives-led boom in the latter half of 2009. While the South Korean market enjoyed a year-on-year rise of 21% last year, GMDAT managed only a 0.6% improvement. Moreover, none of its cars made the top-ten best sellers list.

In 2009, the Daewoo brand not only lost its traditional third place in Korea behind Hyundai and Kia, but Samsung, with total sales of 133,630 units, outsold Daewoo by some 27,000 vehicles. By contrast, GMDAT had ended 2008 almost 4,000 vehicles ahead of its Renault-controlled rival.

Matiz sales were up by 225% in March

More recently, things have improved somewhat. While it took until March for a Daewoo to reappear in the Korean market top ten list, the model in question, the Matiz, suddenly surged into seventh position. The little car’s remarkable 225% year-on-year rise was thanks to keen pricing and promotional campaigns.

Occasional stellar performances by low-priced models aside, the Daewoo brand will always be squeezed by Hyundai-Kia (HMC) in the home market. Its improvement to an 8% market share in Q1 is put firmly into perspective by the combined 71% commanded by its giant rivals. So GMDAT is starting to investigate new strategies to improve things, with some of these learned from HMC.

At the Busan motor show this week, GMDAT not only revealed a new sedan, but its name, Alpheon, is also the vehicle’s brand. As Hyundai has had huge success with its Genesis luxury line, this is a smart move. The car itself, due for launch later in 2010, is a rebadged Buick LaCrosse and will likely be sourced from the Shanghai GM joint venture in China.

A surge in production and exports looks imminent.

The next 6-12 months should see much new model activity for Daewoo, provided of course that it has the cash in place to fund these scheduled model launches: Orlando minivan, second generation Tosca sedan, five-door hatchback and wagon variants of the Lacetti Premiere, new Gentra and Gentra X, plus facelifts for the Winstorm SUV and Veritas luxury sedan.

With the exception of the GM Holden-supplied Veritas, all of these cars will be rebadged as Chevrolets, meaning a surge in production and exports for GMDAT looks imminent.

Over the longer term, General Motors, though it insists otherwise, might also begin to phase out the Daewoo brand. Already, plans have been announced to launch Chevrolet in Korea in 2011. GMDAT president Arcamone, announcing the news at the Busan show, said this will mean “a brand co-existence…not a brand replacement”.

GM insists that the Daewoo name is not going away.

While Daewoo remains a relatively small player in even its home market, it’s easy to imagine cost-conscious General Motors management in Detroit wanting the Chevrolet name to gradually take over from Daewoo.

For the moment, GM insists that the Daewoo name is not going away. If sales continue on their upward trajectory, especially with so much new product coming soon, we should probably believe that statement.

The opinions expressed here are those of the author and do not necessarily reflect the positions of Automotive World Ltd.