DaewooDaewoo (Korean for "Great Universe") was a major South Korean chaebol (conglomerate). It was founded in March 22, 1967 as Daewoo Industrial and was dismantled by the Korean government in 1999. On May 30, 2006 the founder of Daewoo, Kim Woo-jung, was sentenced by a court in Seoul to a fine of approximately 21 trillion won ($22bn USD) and 8 1/2 years in prison on charges including fraud and embezzlement.
Founded in South Korea in 1972 as a joint venture between GM and Shinjin Motor, it adopted the name Daewoo Motor in 1983, and produced mildly reworked GM designs for many years.
Daewoo itself is one of the great Korena cheabols: overarching coporations with fingers in many pies, that dominate the lives of their increasingly prosperous employees. Daewoo makes of ships, electronic equipment, cranes, heavy engineering equipment, buses and trucks as well as cars.
Daewoo motor launched itself into the UK by billing itself at the 1994 NEC Motor Show as the 'Biggest Car Company You've Never Heard Of'. It attracted attention by breaking all the rules. Rather than build up a dealer network, it set up its own direct selling operation, using Halfords as its nation-wide service network. New car sales are on a 'no haggle' basis. Ostensibly attractive, there has been criticism that the trade-in prices offered are lower than trade averages - prices which customers are discouraged from trying to negotiate.
Of a number of models available in Korean (it has never imported all of its products), the original UK model was based on the previous-model Opel Kadett/Vauxhall Astra. Then its main export market was to the USE, where it was known as the Pontiac Le Mans. For the UK market, the Le Mans was called the Nexia, where it is sold as either four-door saloon or five-door hatchback, with a 1.5-litre engine.
In 1993 the larger Espero was added, again based on a obsolete Opel/Vauxhall model, the Ascona/Cavalier. Rather than being a direct carry-over, the Espero bodywork was redesigned by Bertone. The cars were obsolete and ugly, and though reasonably equipped sold mainly on price. The true value of the cars was hidden by the inclusion of a generous warranty and servicing package. This captured customers to the Daewoo service operation; but the products' real value became all too apparent at trade-in time.
Helped by the establishment of technical and development centres in the UK and Germany, Daewoo replaced these vehicles with its first totally home-grown cars in 1996 and 1997, Lanos, Nubira and Leganza.
The company added 4x4 vehicles to its range by buying out fellow Korean maker SsangYong in 1998 and added a well-received mini-car, the Matiz, to its range in the same year.
The company's rapid expansion and the late 1990s Asian financial crisis left it financially vulnerable and in 1999 its creditors, concerned by its massive debts, called time. Whilst operationally its future is not in doubt, the company now looks likely to be taken over by an outside interest. Political considerations make a foreign take-over sensitive, but nevertheless the most likely candidate is Daewoo's old partner GM, though other companies, including Ford, have expressed interest.
Factors that affected Daewoo's performance
Government intervention: Government policy served as a double edged sword: it protected the chaebol, providing them with massive subsidies, unlimited cheap credit, and protection against foreign competition. However, the price for these services was total loyalty to the government. Chaebol were forced to take over industries against their will. The government was constantly involved in their businesses and stifled their creativity.
Labor market: The traditional work ethic that helped Korea reach economic prosperity has been threatened as workers have begun increasingly violent protests against years of long hours and low pay. Daewoo shipbuilding suffered heavy losses due to workers' demands for pay raises.
Operating in a global economy: International demand for free trade is forcing the Korean government to open its market. The chaebol will lose its protectionist import controls. Most recently, the North American Free Trade Agreement and the European Economic Community imposed trade limitations.
Product quality from Korea: Korean products were considered to be of low quality. Companies are trying to improve that image.
By the 1990s, Daewoo Group was heavily leveraged, major markets were stagnant, expenditures on R&D were increasing, labor unrest was continuing, and government policy was turning against the company.
Kim was most recently charged with allegedly paying campaign contributions to former president Roh Tae Woo in exchange for a large government contract to build a submarine base.
Daewoo invested $350 million in a "space zeppelin" program before a feasibility study concluded that zeppelins were unable to achieve flight in space.
Corporations
There were about 20 divisions under Daewoo Group, which before the crisis was the second largest conglomerate in Korea after Hyundai, followed by LG and Samsung. Daewoo Group had under its umbrella several major corporations:
Daewoo Electronics, a strong force both internationally and in Korea
Daewoo Heavy Industries, which created heavy duty machinery
Daewoo Shipbuilding & Marine Engineering, which produced containers and oil tankers
Daewoo Securities, a financial securities company
Daewoo Telecom, which concentrated on the telecommunication aspect of electronics
Daewoo Construction, which built highways, dams and skyscrapers, especially in the Middle East and Africa
Daewoo International, a trading organisation
A further subsidiary was the Daewoo Development Company, funded by cash from the Group, and set up to develop hotels. Seven were built in Korea, China, Vietnam and Africa. They were personally designed and furnished by Choong's socialite wife Heeja who was Chairwoman of the company. The most lavish was/is the 5-star Hanoi Daewoo Hotel which cost $163 million in 1996 and was kitted out by Heeja with fine art, porcelain, sculptures and marble. She invited 3000 guests to the opening, including Russian President Vladimir Putin. There is an 18-hole golf course in the grounds and a swimming pool which is thought to be the largest in Asia. Choong is believed to have spent time there while "on the run". Source: Which Way Next, by Richard Meredith
Current status
Daewoo Electronics survives to this day despite bankruptcy, with a new brand logo "DE", but many of the other subsidiaries and divisions have become independent or simply perished under the "reorganisation" of the Korean government under Kim Dae Jung. In North America, Target stores market Daewoo Electronics products under their "Trutech" brand on an ODM basis.
The group was reorganized into three parts: Daewoo International, Daewoo Engineering & Construction and Daewoo Corporation. It is active in many markets; the most important are steel processing, ship building and financial services.
In 2004, General Motors pulled the Daewoo brand of vehicles out of Australia and New Zealand, citing irreparable brand damage. Later that same year, GM announced that Daewoo Motors in Europe would change its name to Chevrolet as of January 1, 2005. In 2005, it was announced that Daewoo cars would have a Holden badge in Australia and New Zealand. In South Africa, Thailand and the Middle East, Daewoo models were already being sold as Chevrolets. Only in South Korea and Vietnam does the Daewoo marque survive.
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