REPORT: GM ups its ante in GM Daewoo
GM Daewoo has four shareholders: GM, Korea Development Bank, Suzuki Motor Corporation, and Shanghai Automotive Industry Corporation. When GM Daewoo put out a rights issue, only one of the four took the bite: GM, which made it rain to the tune of $412 million and raised its stake from 50.9% to 70.1%.
Neither GM's move nor the non-interest of at least two other parties is surprising. SAIC is still gun shy about certain investments after the Ssangyong debacle, while Suzuki is more concerned with being courted by VW and the Kizashi's fate in the U.S. right now. It is GM that has every reason to strengthen its ties in Asia; after all, The General sold more cars in China last month than it did at home -- and with GM Daewoo.
Daewoo engineers small cars for GM, like Chevrolet's crucial acid test known as the Cruze, and last year, all told, GM Daewoo sold 1.9 million units. The financial infusion will be used for debts and to help the company's liquidity position.
[Source: Detroit News via GM Inside News]
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Reader Comments (Page 1 of 2)
carguy 1:23PM (10/25/2009)
Let's hope that Daewoo can do better than the Aveo this time.
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bh 2:11PM (10/25/2009)
The Aveo was better than the competition in 2004. It's not Daewoo's fault that GM was content to keep selling the 2004-era car indefinitely.
Zakspeed 2:21PM (10/25/2009)
bh, what competition are you speaking of seriously
PJ 2:52PM (10/25/2009)
No, the Aveo really was that bad. At introduction, it was better than the Kia Rio, but worse than the Hyundai Accent--and that was only in the then-depleted USDM subcompact market. In the Euro and UK markets, where the Jazz (Fit), Clio, Polo, etc. were on sale, it was pretty thoroughly ridiculed.
unni 3:56PM (10/25/2009)
check for matiz creative, It the sparc for US. ITs already getting good reviews and safety ratings. Seems GM will sell only proved cars in world market to US now ( ex: Cruze, Matiz ceative etc )
bh 4:31PM (10/25/2009)
@PJ,
I'm sure it was dismal outside of the US. But here, the competition was a Rio that was based on decade-old parts, an Accent with less space, and an Echo and Scion xA that were more money. That changed, but the Aveo was certainly acceptable for the US for 2004. (In some ways, it's still better than the competition of today too, but that's another story.) It's wrong to fault Daewoo for GM's decision to sell a car that was fine in 2004 in 2010.
I'm not saying this as a Daewoo fan (if there is such a thing?) or anything like that. The Lacetti/Suzuki Forenza is an obvious example of crap the company was trying to sell in an attractive wrapper. But at the Aveo's price point and given its competition here in the US, it was not a poor product.
Bob-omb 6:36PM (10/25/2009)
"But at the Aveo's price point and given its competition here in the US, it was not a poor product."
You have got to be kidding. And by the way, its "low price" was entirely the result of every single feature being optional -- $450 for a CD player? Horrible.
The only good thing you could say about the Aveo in 2004 was that it was better than the Cavalier. Barely.
bh 8:18PM (10/25/2009)
I could also say that it was space-efficient and rode well.
travisty 1:26PM (10/25/2009)
So GM doesn't have the money to stay out of bankruptcy, but can somehow come up with $142m to increase its stake beyond the 51% that it already owned?
Somehow I can't help but wonder whether this is the US taxpayer that just increased it's stake in Daewoo instead of GM.
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Tony 1:36PM (10/25/2009)
You got it big time. Taxpayer funded globalisation. You American socialists are still trying to take over the world but it is now government sponsored, thanks to George Bush who started the ball falling.
Santosh Tiwari 2:44PM (10/25/2009)
GM China made a profit. Their year-on-year sales rose by about 20%. They have a positive outlook and have the largest market share there.
Daewoo does the engineering for their small vehicles. Increasing the stake makes sense to me. You make more money by increasing your stake. In the long run, you stand to gain from your investment.
Aveo was aweful. Chevy cruze in my opinion is the most important vehicle for GM. It should be able to out-compete Honda Civic. If it can do that, GM has a winner and will gradually gain market share.
hypermiler 5:25PM (10/25/2009)
@ travisty
> So GM doesn't have the money to stay out of bankruptcy, but can somehow come up with $412m to increase its stake beyond the 51% that it already owned?
Daewoo is a rare case of one automotive asset "wanted" by everybody because of its engineering capability and low-cost supplier base. GM is desperate to keep Daewoo because GM plans to consolidate all its passenger car engineering at Daewoo(Cadillacs excluded), while the Korean government wants it back to form a second world class automotive group like Hyundai-Kia based on assets of Daewoo.
GM would sell Opel, Saab, Hummer, Saturn, Holden and Pontiac, but would absolutely not sell Daewoo. Korean government is actually trying to bankrupt Daewoo while GM's desperately trying to keep it out of bankruptcy with US tax payer's money.
Jimbo 6:27PM (10/25/2009)
GM is NOT going to consolidate all its passenger car engineering to Daewoo in Korea, just small cars. Small cars are Daewoo's specialty and with the investment that GM has made in the company, it only makes sense to use it. But it won't be used for cars like the Malibu or next Impala. Those will be done by the U.S. operations or Holden. And even though the Cruze was mostly engineered in Korea, it is getting significant revisions such as powertrain for the U.S. market. And of course the Volt is being engineered almost entirely in the U.S.
GM won't be designing all their passenger cars in Korea, but you will see them leverage all their global assets in future vehicle design. And that makes sense.
travisty 6:52PM (10/25/2009)
Ok, to the people posting how great of a company Daewoo is - that's not the point. GM owns (owned) a CONTROLLING STAKE in the company (51%). They could already control what it put out, utilize it's platforms for it's own rebadged cars, etc. They already had 100% control over the company.
This $412m (typo in the first post) is nothing more than investing in the company in the hopes that it'll make money down the road. It's hoping that it's cash outlay will provide good returns as far as earnings and increased sales/profit in the years ahead. I'm NOT comfortable with GM accepting billions of dollars in taxpayer aid (that could very well never get paid back) and turn around make an investment like this.
Pay the taxpayer back first, THEN gamble with your own money.
BigWill 8:33PM (10/25/2009)
GM had no choice. If it loses Daewoo, who's going to design GM's small cars? Opel is almost out the door and GM North America's history has shown it as being incapable of designing class-competitive compact/economy cars.
I'm not counting on the Cruze being a huge hit either. It might look good now, but by the time it arrives in the US it's two year old design will be competing with a brand new Ford Focus and Hyundai Elantra, and a refreshed Toyota Corolla.
hypermiler 10:49AM (10/26/2009)
@ Jimbo
> GM is NOT going to consolidate all its passenger car engineering to Daewoo in Korea
Yes, that's exactly what GM executives headed by CEO told Korean government, that they are going to move mid and large size FWD auto platform engineering from Opel to Daewoo during their visit last week.
> just small cars.
And what used to be engineered by Opel after the sale to Magna and Sberbank. In other word, Daewoo is now responsible for next-gen Insignia platform.
This is why GM is willing to put down US taxpayer's money to bail out Daewoo while Korean government's trying to bankrupt Daewoo so that they could pick up its asset at the bankruptcy court, because both desperately want it.
> GM won't be designing all their passenger cars in Korea
Cadillacs will continue to be engineered in the US, so will GM's trucks and SUVs.
FWD passenger car platform engineering consolidates to Daewoo, however.
@ travisty
> This $412m (typo in the first post) is nothing more than investing in the company in the hopes that it'll make money down the road.
GM's trying to delay the bankruptcy of Daewoo with US tax payer's money, something that it didn't do for Opel.
@ BigWill
> GM had no choice. If it loses Daewoo, who's going to design GM's small cars?
And also cars that used to be engineered by Opel. GM was willing to let go of Opel, but not Daewoo. Basically, GM loses a place to engineer FWD passenger car platforms if they lose Daewoo. This is the reason Korean government's trying to force Daewoo into bankruptcy, so that they could take it back from the hands of GM.
vwboyaf1 2:42PM (10/25/2009)
GM Daewoo sells a very elegant version of the G8. I really think this car should have been an Impala here in the states.
http://idc.gmdaewoo.co.kr/gmmcc/gmmcc_ver.jsp?carID=veritas&contentsID=&path=null
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P.V. 3:06PM (10/25/2009)
That's the Holden Statesman, not the Holden Commodore (the latter is the G8 here).
Anyway, I like the Chevrolet and Holden variants' looks much better than this.
Epsilon-Not 4:01PM (10/25/2009)
My personal favorite variant is the China-market Buick Park Avenue... I do like the Veritas, though.
Dana 4:23PM (10/25/2009)
there is no way GM would, they are still too busy selling the decrepit piece of carbage that is the current impala to the fleets. Atleast when it comes to rentals, the american way is to throw the most horrid thing you can come up with at Hertz in the hopes that people would rather just buy a car for their trips.