After buying key assets of Daewoo Motor, General Motors now faces the tough task of setting up a Daewoo distribution organization in Europe.
Daewoo never had one before and now is a terrible time to try to establish a new one. But along with taking care of Daewoo's distribution needs in Europe, GM must also position the brand alongside Opel/Vauxhall and its affiliates' brands.
Daewoo's national sales companies in Europe, whether fully owned subsidiaries or independent, dealt directly with headquarters in Seoul. GM must now create a centralized entity combining the fully owned subsidiaries it acquired in Belgium, France, Germany, Italy, Spain and the Netherlands with private importers in other countries.
Adding to the complexity is that dealers are unsure what form the European Union's new block exemption rules will take. Before discussing how much to invest and what to do, Daewoo's 1,048 dealers in western Europe need to know what will happen to their own businesses.
Daewoo dealers are mostly small and are vulnerable if big dealer groups emerge, as many believe will be a consequence of the new car distribution rules. In general, European carmakers say smaller dealers are reluctant to invest in their facilities because of the uncertainties ahead.
Moreover, the new rules will permit several brands to be sold by multiple franchise dealers at one site. That could result in larger dealer groups picking up Daewoo franchises now in the hands of smaller retailers.
The new Daewoo Europe organization is expected to become operational on July 1, before European Competition Commissioner Mario Monti publishes the final draft of his new block exemption proposal.
On the other hand, Daewoo dealers are just happy to have a future. After a long period of doubt, the brand has a chance not only to survive, but also to prosper. Daewoo sales in western Europe had been rising steadily since the mid-1990s, but declined 39 percent last year to 123,644 units.
Long-delayed products may finally be ready. The Kalos supermini, unveiled at the Paris auto show in October 2000, is on sale in South Korea now and will reach Europe by summer. A long-awaited inline six-cylinder gasoline engine is now available in Korea on the Magnus, the model that will replace the Leganza in Europe in September.
Other good news is that Daewoo models will finally get turbodiesel engines. Isuzu, one of GM's affiliates, is anxious to find new buyers both for the four-cylinder engines it supplies to Opel/Vauxhall and Honda, and for the V-6 that is used by Saab, Renault and Lancia.
But though Daewoo dealers are optimistic about GM's takeover, they lack detailed information.
'Up to now, we have only received a copy of the press release announcing GM's takeover,' said an Italian dealer. 'We would like to know as much as possible - as soon as possible.'
Positioning the Daewoo brand in Europe will be a complicated job. Opel/Vauxhall and GM's partner Fiat already compete directly in every significant segment. But having Daewoo as an ally and not a low-price rival would help GM's and Fiat's profit margins. Daewoo's price-cutting policies devastated Fiat and GM's finances in Poland and southern Europe.
Fiat and GM want to move the Opel/Vauxhall and Fiat brands upscale, leaving Daewoo to battle for entry-level customers with Hyundai and Kia.
But Fiat's plans to move upward with the new Stilo failed. Fiat is now launching a stripped-down version of the lower-medium model in an effort to increase volumes. Opel/Vauxhall is just launching the new Vectra, but it will take another year to add station wagon and Signum sportwagon versions, so it is too soon to say if this upmarket move is successful.
All European volume makers are trying to move upscale, so room for price-sensitive cars will increase. A properly managed Daewoo Europe could take advantage.
GM must also decide whether to include Daewoo in its joint development projects with Fiat Auto. Common components will be used in the next-generation Opel/ Vauxhall Corsa and Fiat Punto/Palio. GM, which owns 20 percent of Fiat Auto, must now decide if there is room for a Daewoo derivative.
Daewoo would benefit by adding its volume to the planned 1.5 million units from GM and Fiat Auto. Without that kind of scale, the South Korean carmaker could not compete on the cost side. And adding Daewoo's 500,000 units to the planned volumes would also benefit the Opel/Vauxhall and Fiat/Lancia brands.
The same could happen when, as expected, GM Europe and Fiat Auto announce plans to cooperate on their next-generation lower-medium models, the replacements for the Opel/Vauxhall Astra and Stilo. The GM-Fiat platform is due late in the decade, though Daewoo would need a replacement for the five-year-old Lanos much sooner.
At the same time, Daewoo's sport-utility range - sold in some European markets by private SsangYong distributors (another problem to solve) - could benefit from common components, systems and powertrains shared with Isuzu, Suzuki and Subaru. GM wants to exploit any possible synergy to reduce costs of relaunching Daewoo and to speed its new acquisition's return to profitability.