Anatomy of a Failed AllianceGeneral Motors and Daewoo Article

Anatomy of the Failed Alliance—General Motors and Daewoo

ANATOMY OF A FAILED ALLIANCE—GENERAL MOTORS AND DAEWOO

In 06 1984, Standard Motors and the Daewoo Number of Korea agreed upon an agreement that called for every single to invest $100 million within a South Korean-based 50/50 partnership, Daewoo Motor unit Company, that might manufacture a subcompact car, the Pontiac LeMans, based on GM's well-known German-designed Opel-Kadett (Opel is known as a wholly held German supplementary of GM). Much of the daily management of the alliance was going to be put into the hands of Daewoo executives, with managerial and technical suggestions being given by a limited range of GM business owners. At the time, a large number of hailed the alliance as a smart approach for both equally companies. GMC doubted that a small car could be created profitably in the United States because of substantial labor costs, and that saw substantial advantages with this marriage of German technology and Southern region Korean inexpensive labor. At the time, Roger Cruz, GM's chairman, told Korean reporters that GM's United states operation would possibly end up adding 80, 000 to 1, 00, 000 cars a year coming from Daewoo Motors. As for the Daewoo Group, it was obtaining access to the superior architectural skills of GM and an meal into the planet's largest car market—the Usa.

Eight many years of financial deficits later the joint venture flattened in a blizzard of common recriminations among Daewoo and General Power generators. From the point of view of GMC, things did start to go significantly wrong irTl-987, just as the first LeMans was rolling off Daewoo's production range. South Korea had lurched toward democracy, and employees throughout the region demanded better wages. Daewoo Motor was hit with a series of unhealthy strikes that repeatedly halted LeMans production. To quiet the labor troubles, Daewoo Motor a lot more than doubled workers' wages. All of a sudden it was less expensive to build Opels in Germany than in Southern Korea. (German wages were still bigger, but German productivity was also greater, which translated into reduce labor costs. )

Evenly problematic was...