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GM, Ford in race for Daewoo, Korea - Views on News from Equitymaster
 
 
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  • Feb 22, 2000

    GM, Ford in race for Daewoo, Korea

    In an interview to a leading business daily, General Motors CEO - Robert Wagoner Jr., revealed that his company along with Ford Motors was in the running for the takeover of Daewoo Motors, Korea.

    Daewoo Motors of Korea has a presence in the Indian auto segment through the Cielo and Nexia (in the mid-sized car segment) and the Matiz (small car). General Motors (GM) India, already has presence in the premium mid-sized car segment through the Opel Astra, while Ford has the Escort (in the premium mid-sized segment) and the Ikon at the lower end of the mid-sized segment.

    As reported in the interview, Wagner Jr. believes that with its past links with Daewoo Motors Korea, GM stands a very good chance of taking over the company, although Ford is also in the running.

    If and when GM does manage to acquire Daewoo Motors, it will enjoy access to Daewoo's brands - Cielo, Nexia in the mid-car segment, which in addition to its current (Opel Astra) and proposed launches (975 cc Corsa) will give it a wider range of brands in the mid-sized car segment.

    On the same lines, Ford's takeover of Daewoo Motors will enhance Ford's basket of brands to include Daewoo's brands (Cielo, Nexia) with its own (Escorts, Ikon) in the mid-sized car segment.

    In addition to the mid-sized car segment, GM's or Ford's acquisition of Daewoo will give both companies access to Daewoo's small car - Matiz and light commercial vehicles (LCVs). Neither GM nor Ford have a presence in the fast-growing small car segment. So from that angle, Daewoo's acquisition is critical for both as far as the Indian market is concerned.

    Moreover, both GM and Ford will also be able to utilise Daewoo India's production capacity of over 70,000 units p.a. in Ghaziabad, Uttar Pradesh. Daewoo also has a manufacturing facility for 300,000 engines and transmissions each.

    Daewoo India's existing infrastructure will save GM/Ford the trouble and cost of establishing new plants. In addition to the economies of scale in production, GM/Ford will also be able to exploit Daewoo India's marketing and distribution networks.

    However, given GM's worldwide tie-up with Suzuki Motors of Japan for the small car, combined with Suzuki's presence in India through Maruti Udyog, will give GM a bigger edge over Ford if its acquisition of Daewoo goes through.

     

     

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