ANATOMY OF A FAILED ALLIANCE:

GENERAL MOTORS AND DAEWOO

Presented By:
Apeksha Bakhru- 4
Shivani Jaiswal -16
Ragini Kumari-30
Rhythm Rupani-32
Varsha Shah-37

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 A Brief about the Case Study
Failed Marriage Of GM And Daewoo
● General Motors and Daewoo Group of Korea invested USD100mn each in
1984 to enter into a Joint Venture that would a subcompact car namely the
Pontiac LeMans.
Management was handled by Daewoo Executive (in large numbers)
& Technical advice was provided by GM executives.

● South Korean cheap labour with advance German technology; Entry

into world’s largest car market- the United States.
● South Korea had lurched toward democracy, and poor quality of the cars rolling off
the Daewoo production line. Workers throughout the country demanding better wages,
doubled workers' wages and poor quality of the car has caused sales in US to fall.
● Daewoo management also believed that the poor sales of the LeMans in the United
States were not due to quality problems but to GM's poor marketing efforts.
● GM management refused to expand the manufacturing facilities of the joint venture
as The plan called for each partner to put in another $100 million and for Daewoo Motor
to double its output, as per GM product quality should improve. GM also refused the
expansion plans in Eastern Europe and the United States.
● GM management delivered a blunt proposal to Daewoo—either GM would buy out
Daewoo's stake, or Daewoo would buy out GM's stake- in the joint venture
● Daewoo agreed to buy out GM's stake. The divorce was completed in November 1992
with an agreement by Daewoo to pay GM $170 million over three years for its 50 percent
stake in Daewoo Motor Company.
Questions

1. What was GM's and Daewoo's motto for entering into the alliance?

2. What might they have done differently to save the alliance from dissolving?

3. What was the reason for the dissolution of the alliance?

4. Why did Daewoo agree to buy out GM's stake?

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 Benefits for GM:
What were GM's ● Advantages of having South Korean
motives for entering cheap labor.
into the alliance
with Daewoo? Benefits to Daewoo:
● Superior engineering skills of GM
● Entry into the world's largest car market—the
United States
● Advanced technology of Germans

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 ● GM was disappointed with Daewoo on produced
What was the component quality and LeMans cars
reason for the ● Inability to build cohesive strategy for operation
of Joint venture
dissolution of
● GM restricted Daewoo to export in United States
alliance? and European markets
● GM never made an effort to sell “Daewoo
Automatic component’’ product outside Korean
market
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 ● Involvement of GM in the Quality assurance
and control department of Daewoo.
● Efforts to increase productivity of Korean
What might they workers.
● Better marketing efforts by GM for
have done differently increasing sales of LeMans outside Korea
to save the alliance ● Expansion in other countries like Colombia,
Venezuela and Ecuador (South American
from dissolving? countries)
● Daewoo’s own Design department for
making cars instead of only relying on GM-
designed models.
● Broadening of product range to meet diverse
customer preferences.
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 ● Korean Policy

The Automobile Industry Promotion policy and The

Automobile Industry Protection Act,

Why did Daewoo Foreign automobile makers were barred from operating
in Korea, except if they have joint ventures with local
agree to buy out entities.
the GM stake?
● Advantage of Technical skills

Later Daewoo went bankrupt and GM bought out

Daewoo, and it was renamed as GM Korea.
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THANK YOU