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March 21, 2003

SOUTH KOREA: GM plans to use Daewoo as in-house coachbuilder – report

GM Daewoo Auto & Technology is forging a unique identity as a builder of mainstream vehicles for other brands, Automotive News Europe reported. At full stream, GM Daewoo plans to export 60% of production from South Korea. Of that, 70% will be marketed as brands of General Motors-allied companies.

By bcusack

GM Daewoo Auto & Technology is forging a unique identity as a builder of mainstream vehicles for other brands, Automotive News Europe reported.

At full stream, GM Daewoo plans to export 60% of production from South Korea. Of that, 70% will be marketed as brands of General Motors-allied companies.

The GM plan is that 500,000 of the 1.15 million units of Daewoo’s installed capacity in South Korea will be sold as Buicks in China, Chevrolets in North and South America, and Suzukis in North America and Japan.

In essence, GM Daewoo would become the world’s largest “Tier 0” supplier.
“To say we are becoming a Tier 0 supplier is a little extreme, but fair,” said Nick Reilly, chairman of GM Daewoo Auto & Technology.

Conventional Tier 0 suppliers are coachbuilders such as Bertone and Pininfarina of Italy — companies capable of designing, engineering, developing and producing a complete vehicle for another automaker.

Other coachbuilders — such as Karmann of Germany, Heuliez of France, Valmet of Finland and Magna Steyr of Austria — specialise in developing and building models for a client automaker, but generally on vehicles designed in-house by the carmaker.

There is another significant difference in GM Daewoo’s business plan. Traditionally, Tier 0 suppliers only build low-volume vehicles that fill a niche, such as coupes, cabriolets and roadsters. Tier 0 suppliers also specialise in local production of volume products sold in foreign markets, such as Pininfarina’s European version of the Mitsubishi Pajero Pinin compact sport-utility or the Chrysler Voyager and Grand Cherokee made by Magna.

But GM Daewoo will only supply mass-market models to other brands, all production that adds to the total volume of vehicles it sells under the Daewoo logo.

GM Daewoo was created last October from selected assets of the bankrupt Daewoo Motor. The new owners are GM; GM affiliates Suzuki Motor of Japan and Shanghai Automotive Industry of China; and the Korea Development Bank, which represents other Daewoo creditor banks.

“We should be very good in order to have our new cars bought again by other GM brands as they are good products and sound business cases in their respective lineups,” Reilly said. “We cannot afford to make ugly models.”

GM Daewoo does not expect to break even this year and does not have a fixed date for returning to profitability.

Making money depends on exchange rates and GM Daewoo’s level of investment in new products “to renew and expand our range,” Reilly said. “We seem to be a bit fortunate, as we are returning heavily in western Europe where currently the euro is strong,” he said. “We could also hope the dollar would strengthen in the second half of the year, when we begin shipping again cars to North America.”

One key product is the first Daewoo sport-utility, which will resemble the Scope concept vehicle shown at this month’s Geneva auto show.

“In South Korea, SUVs jumped from almost nothing to 20% of the
market in just two years, but our SUV won’t be ready for another 24 to 30 months,” Reilly said.

The new SUV will become GM Daewoo’s first vehicle to heavily use components from GM and affiliated companies.

GM Daewoo will continue to sell vehicles under the Daewoo brand in Europe, South Korea and Vietnam.

But GM Daewoo must wait 12 to 15 months for its first diesel models. The first diesel engine is expected to be used in the new-generation Nubira four-door sedan designed by Pininfarina, an export version of the Korean-market Lacetti that debuted at Geneva.

A five-door hatchback Nubira designed by Italdesign will go on sale next year. The current Nubira station wagon won’t be replaced, the Automotive News Europe report said.

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