Out on a limb or on to a winner?

GM Daewoo nears completion of overhaul, taking Chevrolet brand


The extensive overhaul of branding and sales network at GM Daewoo Auto and Technology Co. is nearing its final stages, with all related procedures due to be completed by the end of the first quarter.

The Korean unit of General Motors announced last month that it will remove the badge of “Daewoo” from its company name and new domestic releases as it seeks to improve its image and boost sales.

Under the plan which its CEO calls a revolution, the company will be renamed as GM Korea Company and its GM Daewoo brand will be replaced with the Chevrolet brand.

The changes have been long in the offing. In March last year the company terminated its relations with Daewoo Motor Sales Corp., which has been responsible for GM Daewoo’s domestic sales for about seven years, and replaced it with a multiple retailer system ― something Korean carmakers had not previously tried in the local market.

While some in the industry have voiced concerns over the new system, the company’s higher-than-average growth rate seen last year suggests otherwise.

According to the Korea Automobile Manufacturers Association, GM Daewoo’s domestic sales increased by 9.5 percent from 2009, while the overall market saw a 5.1-percent rise over the same period.

With the company having introduced only one new model, and a small volume one, last year, many of the changes, which became more pronounced towards the end of the year, can be attributed to its sales strategies.

GM Daewoo’s domestic sales recorded a month-on-month increase rate of 15.7 percent, 8.3 percent and 14 percent during the final three months of last year.

In comparison, the figures came in at 2.8 percent, minus 11.5 percent and 9.8 percent during the three months of the third quarter of that year.

However, some point out that such changes could be temporary phenomena brought on by changes in the monthly purchasing conditions.

“Towards the end of the year, carmakers tend to offer larger discounts and lower interest rates in order to reduce backlog before models undergo model year changes,” an official at a local carmaker said.

The company’s move regarding its branding is in stark contrast to the choices made by Renault Samsung Motors Co., whose name, like that of GM Daewoo, identifies both its current majority shareholder, and the defunct company that formed its foundations.

When extending the joint venture agreement with Samsung Group in June 2009, the company also extended the trade license agreement allowing it to use the Samsung name and the oval badge until 2020.

While the media honed in on the disappearance of the Daewoo name from the country’s auto industry, the company said that issues and concerns regarding the change have been discussed for some time.

“It has probably more to do with the name Daewoo and Samsung rather than the carmakers themselves, since Daewoo Group has disappeared while Samsung Group continues to grow, giving the Daewoo name a stronger image of a company that has gone bankrupt,” a GM Daewoo official said. According the company’s vice president for engineering Sohn Dong-youn, such sentiments aren’t limited to consumers, with a significant number of GM Daewoo employees having expressed such concerns.

According to the company the improvement in brand image that will be brought on by the change is evidenced by the large number of its customers who choose to have the GM Daewoo badge replaced with that of the Chevrolet at additional expense.

According to the company about 50 percent of its customers opted to have the GM Daewoo badge replaced with that of Chevrolet at their own expense.

The cost of switching badges is estimated to be between 200,000 won and 300,000 won.

However, not all GM Daewoo dealers are seeing eye-to-eye with the company.

“Obviously new cars will help in notching up sales, but I’m not sure if the emblem change by itself will do much,” a dealer in Seoul said, declining to be identified.

“Personally, I don’t think people who didn’t want to buy a GM Daewoo car before will suddenly want one just because it has a different logo. I think it’s the new cars that will help (increase sales) the most.”

To maximize the effect of the brand change, the company is planning eight new models for Korea this year, with three vehicles ― the 7-seater MPV Orlando, Camaro and the subcompact Aveo ― scheduled for launch this month.

In addition, the company is moving into segments in which it had not fielded models, with the Camaro, Corvette and the Orlando.

While the Orlando is a very different vehicle to the Alpheon, the latter’s success in taking GM Daewoo into a completely new segment bodes well for the company, a fact the company’s executives did not fail to stress.

“The new launches, they may be competing in segments that aren’t big, but the unique nature of some of our vehicles will be able to draw from other segments,” GM Daewoo vice president for sales Ankush Arora said at the Jan. 20 press conference.

“The Orlando is categorized into various segments depending on the market but in Korea we are marketing it as a 7-seater MPV, a segment that is largely empty of competition,” a GM Daewoo official said.

“There is the Kia New Carens, but the vehicle has been around a while, so the market is essentially free of competition.”

Kia Motors Corp.’s 7-seater CUV New Carens was launched in April 2006. While the vehicle has undergone model year changes, it has not had any major upgrades or updates.

However, GM Daewoo’s strategies are without potential pitfalls.

In the hope of raising its brand image, the company has included two high-performance, small-volume vehicles ― Chevrolet Camaro and Corvette ― in the list of new vehicles for this year.

While the Camaro has high recognition among local motorists due to its appearance as an extraterrestrial shape-shifting robot in two hit movies, the company has had limited success with a similar strategy of boosting brand image with a sports car in the past.

In 2007, the company introduced the Saturn Sky Red Line as the G2X but the vehicle petered out with only 179 units sold here between 2007 and 2009.

GM Daewoo’s strategy of flooding the market with new vehicles could also work against the company in achieving significant improvements in a short period of time.

“Popular models are not significantly affected, but once companies begin releasing teaser images and using such marketing tools, sales will begin to drop with less popular models showing larger changes,” an auto industry official said.

All three models due for discontinuation ― the midsized car Tosca, subcompact Gentra and the SUV Winstorm ― saw massive sales drops, up to 50.1 percent, last year.

With the launch date for only one of the replacement models of the three set, the Aveo which will replace the Gentra, and both the Tosca and the Winstorm already pulled from production, the company will have to go without vehicles in two of the three largest segments in the country for the immediate future. Along with the compact segment, the midsized segment took up the largest proportion of last year’s domestic market with 25.8 percent, followed by SUVs that accounted for 20 percent of last year’s 1.22 million-unit market for passenger vehicles.

In addition, with the “new car effect” period of higher-than-usual sales following a vehicle’s launch only lasting for about three months, the new additions will have much ground to cover if GM Daewoo is to realize its target of two-digit domestic market share.

By Choi He-suk (cheesuk@heraldcorp.com)