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    General Motors and Daewoo Failed Alliance

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    Prerna Sharma
    General Motors and Daewoo Group entered a joint venture in 1984 to produce the Pontiac LeMans subcompact car, with each investing $100 million. However, the alliance dissolved in 1992 due to quality issues with the LeMans stemming from poor working conditions at Daewoo, as well as strategic differences between the partners over expansion plans and GM's refusal to improve its marketing of the LeMans. Ultimately, Daewoo agreed to buy out GM's 50% stake in the venture for $170 million over three years.

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    General Motors and Daewoo Failed Alliance

    Uploaded by

    Prerna Sharma
    402 views9 pages
    General Motors and Daewoo Group entered a joint venture in 1984 to produce the Pontiac LeMans subcompact car, with each investing $100 million. However, the alliance dissolved in 1992 due to quality issues with the LeMans stemming from poor working conditions at Daewoo, as well as strategic differences between the partners over expansion plans and GM's refusal to improve its marketing of the LeMans. Ultimately, Daewoo agreed to buy out GM's 50% stake in the venture for $170 million over three years.

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    Analysis of the joint venture of General Motors and Daewoo that did not become successful

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    General Motors and Daewoo failed alliance

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    General Motors and Daewoo Group entered a joint venture in 1984 to produce the Pontiac LeMans subcompact car, with each investing $100 million. However, the alliance dissolved in 1992 due to quality issues with the LeMans stemming from poor working conditions at Daewoo, as well as strategic differences between the partners over expansion plans and GM's refusal to improve its marketing of the LeMans. Ultimately, Daewoo agreed to buy out GM's 50% stake in the venture for $170 million over three years.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    402 views9 pages

    General Motors and Daewoo Failed Alliance

    Uploaded by

    Prerna Sharma
    General Motors and Daewoo Group entered a joint venture in 1984 to produce the Pontiac LeMans subcompact car, with each investing $100 million. However, the alliance dissolved in 1992 due to quality issues with the LeMans stemming from poor working conditions at Daewoo, as well as strategic differences between the partners over expansion plans and GM's refusal to improve its marketing of the LeMans. Ultimately, Daewoo agreed to buy out GM's 50% stake in the venture for $170 million over three years.

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    You are on page 1of 9

    ANATOMY OF A FAILED ALLIANCE:

    GENERAL MOTORS AND DAEWOO

    Presented By:
    Apeksha Bakhru- 4
    Shivani Jaiswal -16
    Ragini Kumari-30
    Rhythm Rupani-32
    Varsha Shah-37

    1
    A Brief about the Case Study
    Failed Marriage Of GM And Daewoo
    ● General Motors and Daewoo Group of Korea invested USD100mn each in
    1984 to enter into a Joint Venture that would a subcompact car namely the
    Pontiac LeMans.
    Management was handled by Daewoo Executive (in large numbers)
    & Technical advice was provided by GM executives.

    ● South Korean cheap labour with advance German technology; Entry


    into world’s largest car market- the United States.
    ● South Korea had lurched toward democracy, and poor quality of the cars rolling off
    the Daewoo production line. Workers throughout the country demanding better wages,
    doubled workers' wages and poor quality of the car has caused sales in US to fall.
    ● Daewoo management also believed that the poor sales of the LeMans in the United
    States were not due to quality problems but to GM's poor marketing efforts.
    ● GM management refused to expand the manufacturing facilities of the joint venture
    as The plan called for each partner to put in another $100 million and for Daewoo Motor
    to double its output, as per GM product quality should improve. GM also refused the
    expansion plans in Eastern Europe and the United States.
    ● GM management delivered a blunt proposal to Daewoo—either GM would buy out
    Daewoo's stake, or Daewoo would buy out GM's stake- in the joint venture
    ● Daewoo agreed to buy out GM's stake. The divorce was completed in November 1992
    with an agreement by Daewoo to pay GM $170 million over three years for its 50 percent
    stake in Daewoo Motor Company.
    Questions

    1. What was GM's and Daewoo's motto for entering into the alliance?

    2. What might they have done differently to save the alliance from dissolving?

    3. What was the reason for the dissolution of the alliance?

    4. Why did Daewoo agree to buy out GM's stake?

    4
    Benefits for GM:
    What were GM's ● Advantages of having South Korean
    motives for entering cheap labor.
    into the alliance
    with Daewoo? Benefits to Daewoo:
    ● Superior engineering skills of GM
    ● Entry into the world's largest car market—the
    United States
    ● Advanced technology of Germans

    5
    ● GM was disappointed with Daewoo on produced
    What was the component quality and LeMans cars
    reason for the ● Inability to build cohesive strategy for operation
    of Joint venture
    dissolution of
    ● GM restricted Daewoo to export in United States
    alliance? and European markets
    ● GM never made an effort to sell “Daewoo
    Automatic component’’ product outside Korean
    market
    6
    ● Involvement of GM in the Quality assurance
    and control department of Daewoo.
    ● Efforts to increase productivity of Korean
    What might they workers.
    ● Better marketing efforts by GM for
    have done differently increasing sales of LeMans outside Korea
    to save the alliance ● Expansion in other countries like Colombia,
    Venezuela and Ecuador (South American
    from dissolving? countries)
    ● Daewoo’s own Design department for
    making cars instead of only relying on GM-
    designed models.
    ● Broadening of product range to meet diverse
    customer preferences.
    7
    ● Korean Policy

    The Automobile Industry Promotion policy and The


    Automobile Industry Protection Act,

    Why did Daewoo Foreign automobile makers were barred from operating
    in Korea, except if they have joint ventures with local
    agree to buy out entities.
    the GM stake?
    ● Advantage of Technical skills

    Later Daewoo went bankrupt and GM bought out


    Daewoo, and it was renamed as GM Korea.
    8
    THANK YOU

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