Daewoo will dismantle its wholly owned UK dealer network and set up a new sales company in the country under General Motors' ownership.
As part of agreement to buy key assets of the bankrupt South Korean automaker, GM will also acquire Daewoo sales subsidiaries in France, Germany, Italy, Spain, Austria, the Benelux countries, Switzerland and Puerto Rico. Those units sell mostly through independent dealers.
The plans in Europe are in sharp contrast with the USA. The GM takeover does not include the US sales unit Daewoo Motors of America, threatening the future of its 525 US dealers. But Daewoo dealers in Europe are unlikely to be affected.
GM will also purchase Daewoo's European parts operations in the Netherlands.
Meanwhile, Daewoo factories in Poland, Romania, Czech Republic, Uzbekistan and the Ukraine have been left out of the deal and are likely to close.
A task force will be sent to the UK to take apart the experimental direct-sales operations set up in 1995.
'GM clearly sees franchise retailing as the way to go and this was made very clear when the two companies started talking two years ago,' said Neil Reeve, spokesman for Daewoo Cars Ltd. in the UK.
In fact, the British company has already started appointing dealers. It has 14 signed up and plans to have 58 by the end of 2002.
Daewoo sales in the UK slumped badly in 2001. They were down 44.8 percent to 19,148 compared with 2000, due to uncertainty over the future of the parent company in South Korea and restructuring at Daewoo Cars in Britain.
'We have been restructuring in the UK,' said Daewoo Cars Ltd. Managing Director S.K. Kim. 'We are now out of the fleet business so naturally we are selling fewer cars, but the company is in better shape.'
Daewoo used the UK as a pilot for dealing direct with customers when it launched in the mid-1990s because it had to build the brand.
'No one knew anything about us and the cars we had to offer at the time were not the latest technology - we were not in a position to attract top dealers,' said Kim.
'Now we have good product and a lot more coming through,' he said. 'We are now looking for dealers who can offer the level of service we have been giving customers for the past six years. We have been in discussion with big dealer groups.'
Daewoo currently has 31 wholly owned dealerships in the UK, down from 36. What happens to the sites depends on who takes over the franchise.
'In some cases the new dealer will take over the site but in other cases we may have to look at what we do with the lease,' said Reeve.
The company's servicing deal with UK accessory and fast-fit chain Halfords is also being wound down. 'As and when dealers are appointed, the arrangements we have with Halfords in those areas will be phased out,' added Reeve.
GM will buy Daewoo's factory-owned distributors in most western European countries. Those subsidiaries sell mainly through independent dealers.
A European operations center will be established to direct and coordinate business in Europe.
Dealers are enthusiastic.
'This is a great opportunity for boosting the brand image and sales,' said Dominique Sanz, who manages a Daewoo France sales point in northern Paris. 'The network will be improved and developed. Our position will be a bit like Skoda's after it was bought by Volkswagen.'
The new company will continue to use the Daewoo brand in Korea, and in countries where overseas subsidiaries are acquired such as those in western Europe, plus in certain countries where independent distributors exist.
David Herman, outgoing president of GM Russia, said the Daewoo brand could also be used on 4x4 vehicles the company is producing in a joint venture with AvtoVAZ in Togliatti, Russia. In addition, the new company's products will be exported to new markets such as Mexico, and use established GM or GM-affiliated brands.
As part of the deal GM will also acquire three Daewoo manufacturing plants. They are located in Changwon and Kunsan, South Korea, and in Hanoi, Vietnam.
Daewoo's sprawling plant in Pupyong, South Korea, will remain open and continue to supply the new company with vehicles, engines, transmissions and components for at least six years. The agreement gives the new company an option to acquire the Pupyong plant at any time within six years.
There is no room in the new operation for Daewoo's other plants in Poland, Romania, Czech Republic, Uzbekistan, Ukraine, India, Libya, China or Egypt. Most have seen it coming. The Korean automaker's plant in Warsaw, Poland, has been up for sale for more than a year.
Daewoo originally spent $1.1 billion (E1.2 billion) renovating this former communist factory, which can produce 400,000 vehicles a year. Last year it built just 90,000 cars. Following a sharp downturn in the Polish economy, the plant moved to a four-day working week to limit its inventory of unsold cars. Worse, the bankrupt Korean automaker cut off credit to its largest overseas plant. Unless new investors are found, the plant may close.
The Warsaw plant was part of a high-risk strategy to build assembly plants in some of the world's poorest regions in the 1990s. But the GM-Fiat alliance already has a strong presence in Poland. The Daewoo plant produces the Matiz, Nubira and Lanos vehicles, plus the Polonez, a car based on a 20-year-old Fiat. Although heavily re-engineered, the Polonez is a relic bought in small numbers by farmers.
'We have a modern car plant with full assembly facilities, research and development capability, and a highly educated work force,' said Daewoo spokeswomen Krystyna Danilczyk. 'We have proved we can be profitable. We now need to find a buyer.'