Professional Documents
Culture Documents
OBJECTIVES
Introduction to Daewoo Motors Daewoo Motors India Ltd. Marketing Strategies Fall of Daewoo Motors Present Scenario
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Kim Woo-Choong
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TOYOTA
Renamed
SHINJIN MOTORS
ABOUT DAEWOO
The Daewoo Group entered the automobile industry in 1978 by acquiring a 50% stake in Saehan Motor Company (Saehan). Saehan was a 50-50 joint venture between Shinjin Motor, and General Motors(GM). In 1976, Shinjin Motors faced financial problems and sold its 50% stake in Saehan to the Korea Development Bank (KDB). In 1978, the Daewoo Group acquired the equity stake and management rights from KDB. In 1983, GM and the Daewoo Group agreed to rename their venture Daewoo Motor Company (Daewoo). Production started in 1987 and about 50% of the cars were exported to the US and other international markets.
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independent company.
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In Financial Year 1995, Koreas Daewoo Corporation bought over DCM Toyota`s equity and increased its holdings to over 90 per cent by Financial Year 1997. The company has also given good cars to Indian roads:Cielo, Matiz and Nexia
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Matiz
Nexia
Cielo
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Continued
After the Daewoo Group gained control in 1978 the name
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About DMIL
Daewoo Motors was one of the successful auto makers in
India.
Originally
incorporated
to
manufacture
light
commercial vehicles. In July 1995, DMIL launched Daewoos 1500cc Cielo. The
car did get a good reception and its sales decelerated since
the 3rd quarter of Financial Year 1997. Since then it had slowdown in the mid-size car segment. Next, Daewoo
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However
Daewoo motors, despite of being the single largest investing company in the Indian Automobile Industry, has not attained that kind of success for which they had hoped. The price slash boomeranged on it. It has thrown an adverse affect on sales, raising queries related to the quality of the reduced price model.
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Strategies
They borrowed foreign debts for further expansion. Introduced the concept of direct selling.
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Discount Strategy
In India Daewoo lost $30 million per annum due to the discounts offered. Also, Daewoo aimed at selling 1 lakhs cars in U.S. but because of poor demand they had to offer steep rebates to increase volumes resulting into huge losses. Though their was an increase in revenues in U.K. , Germany and Italy the trend could not continue for a long time.
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Financial Structure
Due to the financial crisis, Daewoo Group could no longer maintain financial balancing act Foreign debt jumped from 26.3 trillion won to 49 trillion won $5.1 billion in foreign currency loans; $1.9 billion in foreign currency loans to convertible bond owners Sudden increase in interest rates led to financing costs jumping from 3 trillion won to 6 trillion won
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Interest burden increased more than five fold at Rs. 22.92 crores (Rs. 4.36 crores).
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Fall of DMIL
The paid-up capital as of March 1997 was Rs. 511.18 crores and reserves stood at Rs. 286.40 crores. A company statement said that its performance is expected to improve significantly after facilities of engines, transmissions and other components become fully operational. However, industry sources feel that the sales target of Rs. 800 crores for 1997-98 announced by DMIL's Managing Director, Mr. S.G. Awasthi, does not seem achievable.
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Fall of DMIL
Therefore, in order to provide a quick fix to the net income problem and thus increasing profit Daewoo had to cut price. Faced with increasing competition and a sharp decline in sales, Daewoo Motors India Ltd., a subsidiary of South Korea's Daewoo Motor Co., cut prices of all its cars by over 20%. Company officials said the cut was done to pass lower production costs on to consumers, although some agreed the fall in sales prompted the move.
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Fall of DMIL
"On the whole, we have a very positive cost advantage on the Cielo (model) now, with over 70% of the car locally made," Managing Director S.G. Awasthi said. Awasthi, however, agreed there has been a sharp decline in sales of Daewoo cars in India to a projected 12,000 to 13,000 during the year ending March 31, from over 15,000 in the previous financial year.
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Conclusion
Shareholders & Stakeholders
BusinessGovernment Relations
Ownership Structure
Lack of Oversight
Daewoos Fall
Related-Party Transactions
Financial Structure
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Present Scenario
Daewoo has failed in the car market indeed; however, Daewoo Corporation is still alive in other markets.
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Present Scenario
GM Daewoo Auto & Technology has design, engineering, research & development facilities that are involved in development for various GM products.
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