As General Motors Corp. prepares to use the assets of bankrupt South Korean auto maker Daewoo Motor Co. to expand its presence in Asia, many Daewoo customers and dealers, as well as its distributor in the U.S., say they’ve been run over by GM like so much road kill.
Hundreds of Daewoo dealers have been left hanging, with no indication from GM or Daewoo whether they will still be in business in two months, and tens of thousands of customers are facing the prospect of a lack of parts or service for their cars--at least until July, when the GM-Daewoo deal closes.
The world’s biggest car company is spending $400 million to acquire key Daewoo assets overseas, but not the company’s U.S. import and distribution arm--Compton-based Daewoo Motor America--or the franchise contracts of any of Daewoo’s 525 U.S. dealerships. That leaves the U.S. operation in the hands of an empty shell in South Korea, a bankrupt company with no funds and few assets.
In the U.S., as many as 8,000 jobs in Daewoo dealerships are on the line, as well as the fortunes of many Daewoo dealers who saw the company as a way to break into the new-car retailing business. Some of them spent millions of dollars building new, stand-alone Daewoo sales and service facilities in the last year. Collectively they have sold 160,000 Daewoo cars and station wagons since the company began North American operations in 1998.
GM will continue to manufacture Daewoo-brand cars at the plants it is acquiring, for sale in South Korea and Europe. It may also use the factories, to be operated by GM Daewoo Automotive & Technology Co., to produce cars that bear the Chevrolet, Opel or other GM brands and export them to other countries in Asia, Latin America and eventually even the U.S.
The seeming collapse of Daewoo in this country over the last month has left many owners wondering what hit them.
“I never thought I’d have to worry about worldwide corporate politics when I bought my car,” said Ari Mishkin. The 38-year-old hairstylist, who lives in Corona del Mar, paid $20,000 in 1999 for a Daewoo station wagon with luxury equipment including leather seats and a CD player.
“I thought I was getting a good deal, and I’ve been really happy with the car,” he said, “but now it looks like I bought an Edsel.”
Catherine Burdick, a homemaker in Redondo Beach and owner of a 1999 Daewoo, said she’s particularly disappointed “because we had the chance to trade it in when we bought a new car a few months ago.” Instead, she and her husband opted to keep the $17,000 station wagon as a commuter car.
Now, she says, “we’ll probably just drive it into the ground. I don’t think anyone would buy it.” She also worries that if Daewoo dealers fold, “we don’t know where to take it for repairs or even if we can get it fixed.”
Neither, apparently, does anyone else.
GM has said that once the purchase of the overseas Daewoo units is completed in July, “provisions will be made” for warranty repairs on Daewoo cars in the U.S. But its plan seems to depend on existing Daewoo dealers’ staying in business--even though they are not getting new cars or parts these days--in order to perform the warranty work.
Some Daewoo dealers may choose to receive parts from South Korea and remain in the service business, GM suggests. Or the new company GM and its investment partners have formed to acquire the Daewoo assets could set up a trust fund to reimburse U.S. Daewoo dealers or others for performing warranty services.
“We’re concerned that customers are serviced properly,” GM spokeswoman Toni Simonetti said. “They should not have a problem.”
But until the GM deal closes in July, Daewoo owners should continue to contact their Daewoo dealers, she said.
And those dealers shouldn’t look to GM for help. “GM never had a relationship with Daewoo Motor America,” Simonetti said.
“Any issues dealers have are with Daewoo Motor Co. [in South Korea], not with GM.” Expecting GM to make Daewoo dealers whole is “like asking Wal-Mart to be responsible for Kmart’s bankruptcy,” she said.
A group of more than 300 Daewoo dealers has retained legal counsel and argues in a claim filed Thursday in Florida that GM should continue honoring the dealers’ franchise agreements. Dan Myers, the Florida attorney representing the group, said he expects to file similar claims with franchise regulators in Texas and Pennsylvania this week and is considering an administrative action in California and a federal damage suit as well.
Despite GM’s claims that it has no relationship with Daewoo in the U.S., by saying it will honor Daewoo warranties later this year, the auto maker seems to be claiming to have distribution rights for Daewoo, Myers said. “If that’s the case, then it should offer existing Daewoo dealers the same franchise arrangements they had with Daewoo,” he said.
Many of those dealers wonder how long they’ll be able to keep their doors open.
“The most frustrating part is that we really don’t know anything. We are in the dark because GM isn’t talking to us, Daewoo in the U.S. isn’t talking to us and Daewoo in South Korea isn’t talking to us,” said John Haddad, owner of Daewoo dealerships in Huntington Beach and Bakersfield. He also sells Kia vehicles, another South Korean brand, and expects to simply close down the Daewoo side of his operation and expand the Kia franchise.
It won’t be that easy for Bobby Colon, owner of Daewoo dealerships in Cerritos, Fullerton, Ontario and Downey. His Downey store also sells Dodges, so that will remain open, but a spokesman for Colon said the three other stores are likely to be forced to close at some point. Together, they employ about 120 people.
Alex Uribe, the new general manager at Daewoo of Cerritos, said Colon’s dealerships would continue servicing customers’ cars, with or without warranty coverage, as long as they are able to remain open.
Gary Connelly, vice president and general manager of Daewoo Motor America, said he sympathizes but can’t offer any comfort. “No one is talking to us either,” he said. “We keep calling [Daewoo in South] Korea, but they don’t call back. And GM won’t tell us anything.”
Connelly said that Daewoo Motor America has an adequate stock of most parts in its warehouses in Compton and Atlanta but acknowledged that some parts--including critical pieces such as timing belts that are necessary to keep cars running--are in short supply.
“We have been on a cash-only basis with Korea,” Connelly said, “and we can’t get new cars or buy new parts because we don’t have cash.” Daewoo Motor America laid off about 100 employees late last month, with a skeleton crew of 60 remaining.
Some industry watchers say the situation is a study in how not to do things.
“GM really needs to weigh the cost of the bad relationships it is breeding,” said Chris Denove, a partner at auto marketing consultant J.D. Power & Associates. “Daewoo is so small it just doesn’t make sense for GM to purchase parts of it while allowing customers in the U.S. to go unfulfilled.”
Not every Daewoo owner feels abandoned, though.
Vicky Weiseman, a 29-year-old Daewoo customer in Bethlehem, Pa., said in an e-mail interview that “it is reassuring to know that [GM] will take care of Daewoo owners after July.”
Weiseman, who recently bought a 2001 Daewoo Lanos hatchback, the company’s smallest car, said, though, that she is “a bit nervous to know that if something happens before July, I may have to pay the total cost even if it is under warranty.”
It might be cheaper simply to buy a new Daewoo.
Haddad, the Huntington Beach dealer, said he is offering 2002 model Daewoo sedans with a factory sticker price of $16,000 “for about $9,000 now. I just want to get them off the lot” to reduce carrying costs. He said he has 185 Daewoos in stock.
Times staff writer Terril Yue Jones in Detroit contributed to this report.