GM Daewoo in Soul Searching for New, Better Business Model
By Kim Hyun-cheol
Like many other carmakers, GM Daewoo had an equally daunting time last year amid the prevailing worldwide financial crisis. Its annual vehicle sales at home and abroad totaled 1.54 million, down 19.3 percent from the previous year, with more than 60 percent coming from exports of completely knocked down (CKD) products.
It sold 114,846 vehicles at home and shipped 463,912 vehicles abroad, with contractions of 1.4 percent and 39.4 percent, respectively.
Overall uncertainty in the global economy hit the whole automobile industry here with instable exchange rates and surging prices of raw materials, GM Daewoo said. However, the Korean unit of the U.S. giant General Motors added that it is set to turn the time of peril into a new opportunity of growth through responding to the situation with prompt and proactive measures.
To reach its current goals, ``change'' is the key word to lead its management throughout this year. It will be reflected in major projects on the go. As a recovery appears underway in both markets on both home turf and in the overseas markets, it plans to be aggressive in achieving its annual sales targets.
The main priority for the company will be profitability, aimed at raising its showing to a full-year surplus. ``In 2010, GM Daewoo will be profitable. That is my target,'' GM Daewoo President Mike Arcamone said last month.
Last year, GM Daewoo posted 155.1 billion won ($139 million) in operating profit, but ended in a 343.7 billion won net loss due to a forward exchange failure. Relying heavily on exports for more than 80 percent of sales, the maker used a forward exchange in a risk-hedging measure, but a sudden surge in won-dollar rates in late 2008 dealt a severe blow to the plan.
GM Daewoo says the same thing won't happen this year as exchange rates remain stable and all forward contracts will expire in mid 2011.
For profitability, the company aims to raise domestic sales by more than 20 percent to resume a double-digit market share, as well as total 1.6 million vehicles in exports.
The overall performance is already showing signs of rebounding since late last month, GM Daewoo says. In December last year, it saw local sales rise 156.5 percent to 14,632 vehicles, the biggest monthly sales record in three years.
For the first quarter of this year, the maker recorded 166,127 vehicles in total sales, growing 23 percent from the same period last year. Domestic sales grew 43.4 percent to 26,644, and exports increased 19.7 percent to 139,483.
Unlike its local rivals, GM Daewoo didn't release any new models of late. But its domestic sales in the first three months of the year outdid the industry's average of 36 percent. It saw the biggest contribution in a new competitive sales network system launched in January.
In its ``multiple retailer system,'' eight regional sales headquarters take the responsibility for sales and managing customers. Before that, GM Daewoo was in an exclusive outsourcing agreement for sales with Daewoo Motor Sales Corp.
``GM Daewoo had an outstanding month despite the termination of our sales agreement with Daewoo Motor Sales,'' said Kim Sung-kee, GM Daewoo's managing director of domestic sales and marketing. ``Our strong domestic sales are a sign of the stability and efficiency of the new retailer system.''
It expects its sales target to be achievable if the company maintains the current flow. Following the latest edition of the Lacetti Premium compact sedan, which hit the market last year, GM Daewoo will launch a new grand-size sedan model this year in rivalry with the Hyundai Grandeur of the Kia K7.
The new product, currently only known by its code name VS-300, is a localized version of GM's luxury sports sedan, LaCrosse.
In overseas markets, GM Daewoo is gaining momentum with the launch of a Matiz Creative mini car in Europe earlier this year, which is expected to add more stable sales to those of the Lacetti Premier.
It sold 8,744 Matiz Creative models in Europe in the first two months to contribute a 14 percent growth to Chevrolet Europe, GM's European unit.
Also, the maker expects to consolidate its relations with growing markets such as Vietnam and Uzbekistan in exports of CKD products. Last week, it launched the Chevrolet Cruze, a new global model based on the Lacetti Premiere, in Vietnam.