Daewoo deceased in Australia

DAEWOO is dead in Australia.

Holden, the owner of the distributorship, announced today its decision to kill off the South Korean brand here by December 31, 2004.

The decision, made by the Holden board with the approval of GM Daewoo and GM, directly affects 37 staff employed by GM Daewoo Australia, who will either be retrenched or absorbed into the Holden organisation.

The 110-strong dealer network - including 39 with Holden franchises - was notified of the decision today.

Holden says it is confident it will not face the same sort of legal strife parent General Motors encountered when it withdrew Daewoo from the US market.

All dealers were placed on a temporary agreement last year by Holden that terminated on December 31, 2004. This was the first public sign of Holden’s struggle with the brand.

Since Daewoo was first retailed in Australia in 1994, more than 140,000 examples have been sold.

Holden says the existing Daewoo network will continue servicing responsibilities until December and Daewoo owners will then be supported by participating Holden dealers.

Holden will also make arrangements to cover warranty obligations, including any applicable warranty offered by the previous distributor, as well as roadside assistance.

Holden set-up GMDA as part of parent General Motors’ purchase of elements of the bankrupt Daewoo Motor Company and became the reconstituted GM Daewoo and Technology’s largest individual shareholder.

When Holden announced GMDA in August 2002, Holden executive director sales and marketing Ross McKenzie confidently predicted 15,000 sales in 2003 and 20,000 in 2004.

Instead - despite the arrival of the Kalos mini-car and Lacetti sedan – Daewoo finished 2003 at 8143 sales.

That was well behind the old Daewoo Automotive Australia’s final full year of sales and miles away from the heady volumes of 1998 and 1999, when DAA sold more than 21,000 cars each year.

Mr McKenzie, a GMDA board member, said yesterday that Holden saw little chance of improvement in Daewoo’s market position, citing increasing competition from Japanese and South Korean rivals in the light and small segments in which Daewoo mainly competes.

He said GM Daewoo had been hit on two fronts - unable to match the massive economies of scale of Hyundai/Kia, while the Japanese led by Toyota have exploited favourable moves in the Yen-Aussie dollar exchange rate to bring prices down.

“Looking forward, we see no possibility of the environment shifting in any way other than becoming even more competitive and even more crowded,” Mr McKenzie said.

“There is nothing tangible to suggest that GM Daewoo’s fortunes as a brand in this country will significantly change in the coming years."Although unwilling to talk specifics, Mr McKenzie left no doubt that Holden had lost a significant amount of money - “in the order of millions” - on the Daewoo business, falling well short of the initial break-even target.

“The performance of the GM Daewoo brand has been below our hopes and expectations,” he said.

“This is a matter of brand value and strength and certainly not a reflection on the products themselves.”

That endorsement and Mr McKenzie’s refusal to answer any future product questions will certainly raise speculation about whether there is already a plan to rebadge Daewoo cars as Holdens for the local market.

Certainly, the Lacetti and Kalos model could be the answer to Holden’s long-term concern about the increasing expense of the European-sourced Astra and Barina.

Internationally, Daewoo prospers in its own right in few markets outside South Korea. But its products are sold successfully via a variety of GM nameplates in more than 120 countries globally.

Suzuki also retails rebadged Daewoos in some markets, and the potential for that to happen here must now be a possibility too.

In Australia, Holden is already set to take a version of a mid-size cross-over wagon being developed at Daewoo which is codenamed C-100.

That project – and many others including a Daewoo version of the Statesman – is being overseen by Australian Michael Simcoe, GM executive director Asia Pacific Design, and highly-rated young former Holden designer Max Wolff.