Future unclear for Daewoo's Indian ops


GM is not buying the Bupyong plant, or most of Daewoo's overseas operations

By Alex Frew McMillan
CNN Hong Kong

NEW DELHI, India -- The future of Daewoo Motor India is hanging in the air, after General Motors excluded the subsidiary from its purchase of the Korean car company.

General Motors and its partners on Tuesday finalized their agreement to buy much of Daewoo for $400 million.

GM and its team will take a 67 percent stake in the new Daewoo, a joint venture with Daewoo's creditors, who will own 33 percent (full story on deal).

The JV will own three factories and nine overseas subsidiaries. As expected, GM took on the factories in Changwon and Gunsan and did not buy Daewoo's controversial Bupyong plant, its oldest and largest.

Most overseas operations excluded

The deal also excluded much of the car company's operations outside of South Korea, including those in Poland and India. The only factory outside Korea that it is buying is in Hanoi, Vietnam.

On the sales side, GM is buying only seven sales units in Europe, one in Puerto Rico and a parts operation in the Netherlands.

Daewoo's Indian operation, known as DMIL, makes the Matiz car and was planning to introduce three new models, as well as a revamped Matiz, over the next few years. Those plans have now been called into question, local media report.

Allan Perriton, the General Motors executive in charge of its partnerships, said the new Daewoo has agreed to supply the affiliates that it did not buy for at least three years, then review the situation.

Yearly review

Troubled Daewoo Motor India can "renew its agreement" after three years "on a yearly basis," Perriton said, according to the Times of India Group.

The new Daewoo will supply parts to customers and affiliates and continue to honor warranty agreements. But rolling out any new models, such as the Nubira and the Lanos, is unlikely.

"Our obligation is to continue supplying [completely knocked down] kits only for current models," Perriton explained.

DMIL officials say they expects to continue sales talks with GM. But GM spokesman Rob Leggat characterized that idea as "speculative."

Daewoo Chairman Lee Jong-dae said this week that the excluded portions of Daewoo will also be sold off. He said Daewoo would sell the Polish operation within two years.

Sales down for April

Meantime, figures released on Thursday show that Daewoo's sales dropped for April, with larger competitors Hyundai and Kia continuing to gain market share.

Daewoo workers initially demonstrated against a sale to an American buyer, and analysts say consumers worry quality may have suffered from the labor dispute. Daewoo's union finally signed off on the sale to GM.

Daewoo's total sales fell 8.4 percent to 37,802 cars, against year-ago figures. Sales in South Korea fell particularly fast, with exports dipping just 2.2 percent.

In response, Daewoo unveiled a new car -- the Kalos. The company is selling the Kalos as a cross between a sport-utility vehicle and a passenger car.

Both Hyundai and Kia have seen strong sales for their new sport-utility vehicles, the Hyundai Terracan and Kia Sorento. Hyundai owns around 46 percent of Kia.

However, DMIL is now unlikely to produce the Kalos, as it had earlier planned.