Korean Unit Looms Large for GM

Posted by: Ihlwan Moon on June 4, 2008

With oil prices soaring and consumers moving away from trucks, General Motors’ 2002 acquisition of bankrupt Daewoo Motor in Korea looks increasingly smart. The Korean unit, now called GM Daewoo Auto & Technology, is not only profitable but also crucial in strengthening the small car lineup of the Detroit giant.

To underline the Korean unit’s importance, Bo Anderson, GM group vice president in charge of global purchasing and supply chain, pointed out in a recent trip to Seoul that his group now buys some $10 billion worth of parts from Korean suppliers annually. That’s more than one tenth of the group’s overall purchase of parts around the world.

The big volume spells GM’s Korean success story. GM Daewoo sold 1.89 million vehicles last year around the globe, including those shipped as kits for assembly in local markets. The sales, up from 1.53 million in 2006, account for about 20% of GM’s global production last year, double from about 10% two years earlier. GM Daewoo produced virtually all Chevrolet cars sold in Europe and shipped more than two thirds of GM cars sold in China in the form of kits in recent years.

The essential role the Korean unit is playing in GM is in the small-car segment. GM Daewoo, which is now responsible for developing new-generation mini and small cars for all GM brands, will help its parent offer competitive models in the face of pressures to cut back in truck production in the U.S. It is one reason why GM appears better equipped than its Detroit rivals to ride out tough times ahead.

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Bloomberg Businessweek’s team of Asia reporters brings you the latest insights on business, politics, technology and culture from some of the world’s biggest and fastest-growing economies.

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