Automotive History: The Tangled Story Of Daewoo In The United States

Ads like this tried to recruit new dealers. Daewoo was bankrupt 18 months after this ad ran.

Realizing the need to vastly expand its dealer network, Daewoo Motor America provided massive incentives to prospective dealers – scrapping the traditional franchise fee, and paying for what would ordinarily be significant franchisee costs such as signage and showroom fixtures.  The idea was to make it remarkably easy and cheap for existing multi-line dealers to add a Daewoo franchise.  Daewoo planned to expand to 500 franchised dealers within two years – a goal, remarkably, that it achieved.

Furthermore, Daewoo scrapped its guerilla marketing tactics – in 2000 the company (which initially sought to minimize mainstream print and TV ads) spent $40 million on US marketing.  The very conventional ad above doesn’t seem like it was made for the same company whose marketing director said, just a few months earlier, “we have to do something completely different.”

Daewoo’s US employees must have felt whiplashed: First, their company tried to be the country’s hippest, most unorthodox carmaker… then suddenly it was just the opposite: Let’s open 500 dealerships and flood the airwaves and magazines with ads!  So goes the products of desperation.  And Daewoo certainly became desperate.

During their launch, Daewoo Motor America officials predicted 15-30,000 cars in the first year of US sales, and 100,000 annually within three years.  They tried for this by offering three models – the subcompact Lanos, the slightly larger Nubira, and our featured car, the midsize Leganza, which debuted with prices between $16,000 and $20,000.  More than just a flagship for a fledgling lineup, the Leganza was the car on which Daewoo pinned its hopes.

2001 Daewoo Leganza SE right front

Mid-sized cars like the Leganza generated more profit for carmakers than did subcompacts, so Daewoo hoped to concentrate on that market segment, both to bring home much-needed cash, and also as part of a marketing strategy that sought to avoid being typecast as a cheap car of last resort.  With so much having ridden on the Leganza, it’s worthwhile to take a closer look at the 2001 example that serves as our featured car.

2001 Daewoo Leganza SE right rear

If the Leganza looks European, that’s no illusion.  Giorgetto Giugiaro’s Italdesign created it, based on that firm’s 1990 Jaguar Kensington prototype.  While not the most distinctive design, the overall car sported the conservative and mildly generic look popular among mid-size sedans of its era.  Seemingly at odds with the unconventional early US marketing efforts, Leganza wasn’t intended to stand out from the crowd – just the opposite: Daewoo wished to jump right into this popular market segment with a car that looked and drove like it belonged there.  Everything about this car was designed to represent the nice side of average.

This Canadian Daewoo ad has the catchy “Daewoo That’s Who” slogan, that was never used in the US.

Power was delivered to the front wheels by a 2.2-liter, 16V 4-cylinder engine producing 131 hp and 148 lb-ft of torque – measurements all within a hair of both Accord and Camry standard engines (6-cyl. engines weren’t yet considered obligatory for this class).  This engine reveals some of Daewoo’s development philosophy: in order to develop its range of new cars within a few years, Daewoo outsourced some componentry, in this case, the engine was sourced from General Motors’ Holden division.

2001 Daewoo Leganza SE

Leganzas were offered in three trim ranges, starting with our featured car, which is a “base” SE.  For a base model, this was well-equipped for the times, coming with air conditioning, power windows and locks, a cassette player, heated mirrors, etc.  In regards to equipment, the Leganza SE was more equivalent to mid-level variants of its competition, as the base Accord DX and Camry CE came without these features.  A long list of equipment and a low price were Leganza’s selling points… in 2000 (midway through the Leganza’s three-year run), a 5-spd. SE listed for $13,660… or $14,460 for an automatic.  That’s about $4,000 less than a comparably equipped Accord LX.  Higher-trim Leganzas piled on the luxury even more, with only modest price premiums, further increasing the Daewoo’s relative value over its competition.

For only about $2,000 more than the SE, one could spring for an SX, which added ABS brakes, leather upholstery, a CD player and other goodies.  Another $2,000 on top of that would get a top-line CDX that went full-luxury by adding items such as automatic climate control, a sunroof, power driver’s seat and “simulated woodgrain appointments” on the interior.  With a fully-equipped CDX listing for around $18,000, Leganzas undercut equivalent Accords, Camrys or 626s by about $7,000 (and that’s before discounts, which were substantial).

2001 Daewoo Leganza brochure interior dashboard

This brochure image shows the CDX’s dashboard.  Aside from the world’s most generic steering wheel, this was a nice place to be – well-presented controls and good quality materials.  Imagine this view but without the plastiwood trim and with a few more blank controls, and one can envision our featured SE’s dash.

2001 Daewoo Leganza brochure interior

Overall, the interior matched others in its class in terms of both size and materials.  Like the rest of the Leganza, there was nothing distinctive here, but quality beige conservatism sold in this market segment in the late 1990s, and from that perspective, Leganza delivered the goods.

2000 Daewoo Leganza ad

On paper, Leganza seemed competitive, and undercut the mid-size sedan class leaders like Accord.  In reality, it was indeed pretty good, though not quite as refined as much of the competition.  Reviewers noted road noise, engine noise and jittery handling more reminiscent of previous decades, but plenty of buyers would gladly sacrifice some subtle refinement for a good-looking and decently-built car that cost thousands less than the competition.

Source of sales figures:

For its first two years, Daewoo did remarkably well for a new firm, especially given its circumstances.  In 2000, sales increased rapidly, so Daewoo could legitimately claim to be America’s fastest-growing nameplate.  However, in 2001 sales fell by over a quarter, and then plunged 60% more for 2002.  Among other things, Daewoo was battling adjectives… many articles and reviews about their cars prefaced Daewoo’s name with terms like troubled or ailing, due to the company’s financial woes.  From a potential customer’s standpoint, this wasn’t exactly a confidence-booster for one of life’s biggest purchases.

Ultimately, Daewoo sold about 170,000 cars in the US – about a third of them (59,000) being Leganzas.  It’s easy to see how, for certain buyers, Leganzas held appeal versus Accords or Camrys.  Of course, one could be reasonably sure that Honda or Toyota would be around before the car’s warranty period expired… which didn’t happen with Daewoo.

When our featured Leganza was built, Daewoo Group was the world’s 18th largest company, but was $80 billion in debt.  Much of this was attributable to the chaebol’s auto subsidiary, Daewoo Motor Company, which was saddled with the toxic combination of unfulfilled hopes, excess capacity, and lots of bills coming due.  The knockout punch came with the quick-spreading financial crisis, which hit Korea particularly hard and left many of its companies on unstable footing.

When Daewoo entered the US market in 1998, the chances were good that Kim Woo-choong himself knew the company was in peril.  Early that year, Kim asked GM to buy back into Daewoo Motor, but GM declined.  In fact, the US sales venture may well have silently morphed into a tactic to extract a higher bid from an eventual corporate benefactor, with Daewoo able to point to strong sales in the world’s biggest car market.

In April 1999 Kim Woo-choong announced a restructuring plan for the entire Daewoo Group.  But at that time, he didn’t publicly express alarm over his company’s future – that very week he met Queen Elizabeth II during her state visit to Korea and proudly showed Her Majesty Daewoo’s Seoul design center.  However, the chaebol’s financial condition only worsened, and dogged by pending catastrophe and allegations that he knowingly concealed his company’s problems, Kim fled Korea later that year (he eventually returned, was convicted of accounting fraud and embezzlement, and sentenced to 10 years in prison).  From then on, it became clear that Daewoo Group as a whole was failing.

What followed – roughly paralleling Daewoo’s time in the US market – was three years of a once-great company flopping around, trying desperately to stave off death.  In late 1999, the Korean government assumed the role of overseer to Daewoo’s operations… and essentially chose GM to take over Daewoo Motor.  However, Ford, DaimlerChrysler and Hyundai all announced that they too were interested in purchasing Daewoo’s automotive business, so seeing multiple suitors, the government decided to auction the company instead.

Source: Detroit Free Press, May 14, 2000

One might reasonably ask: What was the appeal of buying this debt-ridden car company?  The attraction lay in Daewoo’s vast manufacturing and sales network, and its strong presence in parts of Asia, which other manufacturers hoped to build upon, speculating that growth in Asia’s car market in the new millennium would be very strong.

Ford outbid its rivals in a June 2000 auction, but it wasn’t an auction for ownership of Daewoo Motor, but rather for the rights to negotiate such a deal.  However, those negotiations abruptly failed three months later – Ford simply walked away from the deal, possibly after getting a hint that Daewoo was more debt-burdened than originally thought, but also maybe resulting from Ford’s Firestone tire recall and its affiliated costs.  This was strictly bad news for Korea.  By that time, Daewoo Motor was insolvent, and it’s not exactly easy to find a suitable buyer for a bankrupt car company.  All of this led Daewoo back to the company from which it had split just eight years before.  Somewhat remarkably, GM expressed interest.

This corporate courtship produced results in October 2000 when GM submitted a letter of intent to acquire Daewoo Motor Co.  But from there, it still took a year and a half to reach a final agreement.  The main complicating factor was that Daewoo Motor’s debt was almost inseparable from the debt of its parent company’s other subsidiaries, which became an accounting quagmire.  Of course, both negotiating parties had differing views on this topic: GM wanted to reduce its own debt assumption as much as possible, while the Korean Development Bank, the state-run entity that handled the auction, wanted just the opposite.

During the long period of negotiations that followed, Daewoo’s financial prognosis only worsened, and creditors worried that if GM backed away like Ford had, all hope of achieving a decent deal for Daewoo would be gone.

GM presented a formal offer for Daewoo in May 2001.  But that still wasn’t the end.  Another sticking point emerged regarding Daewoo’s aging Incheon factory: GM didn’t want it, but the Korean government insisted that it be included in the deal.  Uncertainty regarding this led to labor unrest, and riots among employees who feared being laid off.  This delayed the deal by several more months.

From left, Daewoo Motor Chairman Lee Jong-dae, Korea Development Bank President Jung Keun-yong, and GM Chairman John F. “Jack” Smith, Jr. shake hands after finalizing the deal.

Finally, the GM/Daewoo deal was ironed out in April 2002: GM paid $1.7 billion in cash and preferred stock for control of the new company, to be called GM-Daewoo Motor (later changed to GM Korea).  The troublesome Incheon plant remained controlled by Daewoo’s creditors… GM leased it back and produced cars there, and did actually acquire it years later.  In exchange for the Incheon compromise, and a Korean concession to shield GM from any hidden debt, GM agreed to no layoffs, which eased labor problems.

Interestingly, through a torturous negotiation process, GM drove an excellent deal.  By playing the waiting game, GM negotiated a good price, shielded itself from hidden debts, and was able to pick and choose which foreign subsidiaries and production facilities to include in the deal.

And one other item… GM’s deal did not include Daewoo’s American dealer network.  GM elected to dismantle the US operations (much to the exasperation of those 500 dealers), rather than to pour money into what was effectively competition for GM brands.  Daewoo Motor America filed for bankruptcy in July 2002.  US Daewoos sold during this period when the GM sale was pending were heavily discounted, but customers bought isntant orphans, and no one knew how much support GM would provide to existing Daewoo customers or dealers (turns out it was absolutely no support whatsoever… buyer beware).

Overall, GM’s Daewoo acquisition was a shrewd move.  The deal helped GM penetrate the sizable Korean domestic market, and also enabled GM to use Daewoo’s relatively well-regarded line of cars as offerings in emerging markets.  GM turned the vast majority of Korean Daewoo production into exports.  Within four years, GM-Daewoo was producing over 1 million cars for 150 countries… and became the key of GM’s early efforts to become a strong player in China.  While the Daewoo nameplate quickly disappeared from most of the world, many Daewoo models were rebranded as Chevrolets.  Ten years after the deal closed, one-quarter of all Chevrolets sold worldwide were built in Korea, and were essentially Daewoos.  And even though GM Korea’s worldwide role is now somewhat uncertain (GM has withdrawn Chevrolet from many markets where the company’s Korean-built cars were sold) the Daewoo acquisition still ranks as a net positive for GM’s long-term operations.

South Korean President Lee Myung-bak and US President Barack Obama tour GM’s Orion Assembly plant in 2011. The Chevy Sonics built at Orion were developed in part by GM Korea.

Ironically, for American consumers, Daewoo proved more successful in death than in life.  As soon as the ink dried on the Daewoo deal, GM announced that it would sell Daewoo’s Kalos model in the US as the Chevy Aveo.  Other models followed, such as the Spark and Sonic, as well as many rebranded Suzukis.

Later GM Korea cars became even more common sights on American roads – for example, the Chevrolet Cruze and Buick Encore.  In its best year of 2014, Americans bought about three times more Cruzes than they did of all Daewoos during the brand’s three-year US experience.

2001 Daewoo Brochure

With each passing day, the Daewoo name fades further from people’s memories.  However, few business stories can quite match Daewoo’s US experience.  Its 1,300 days in the US market was full of high hopes, unrealistic expectations, bizarre strategies, impending doom… and cars that are now barely remembered.  So, if anyone asks “Who had the strangest experience selling cars in the US?”… the answer is likely “Daewoo, that’s who.”


2001 Leganza photographed in Paris, Missouri in June 2020.


Related Reading:

Junkyard Classic: 2001 Daewoo Leganza CDX – Battling Uphill All The Way   Jim Klein

CC Capsule Review: 2000 Daewoo Leganza – Will’s First Car   Paul N (review of his son’s Leganza)

Curbside Capsule: Daewoo Nubira – A Family COAL   William Stopford

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