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GM Daewoo Soars

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Chosun News Story - Korea

As GM Daewoo Soars, Kia Crumbles

After Korea suffered the financial crisis of the late 1990s, Kia Motors and Daewoo Motor, two of the top three automakers in the country at the time, changed hands. Kia was bought out by Hyundai, becoming Hyundai Kia Automotive Group in 1998 and Daewoo, which went bankrupt in 2000, was sold to GM of the United States two years later.

Nine years have passed since Kia was sold, and seven since Daewoo went belly up. In that time these companies have traveled in opposite directions. Thanks to stable labor relations, Daewoo has grown rapidly as a production base for small and compact GM-branded cars. In contrast, with a strengthening won and chronic labor disputes, Kia incurred a loss in 2006 for the first time in eight years.

¡ß Work is Steady at GM Daewoo Plants

Daewoo's fortunes have turned considerably since it was acquired by GM, netting a profit of W64 billion (US$1=W935) in 2005 and about W100 billion last year. GM Daewoo's management has been put on the normal track because it established the company as a global production base for GM. The company is regaining trust in the domestic market as it maintains stable labor relations and enhances both quality and productivity. GM Daewoo's market share was 9.5 percent in 2004, but rose to 11 percent last year. With the exception of small-scale partial walk-outs at provincial plants in 2004 and 2006, the company has experienced few serious labor disputes.

GM Daewoo's affiliates are enjoying the success. "We're receiving increasing numbers of orders every year," said an official from an affiliate company. "We've already been put on the normal track."

¡ß Kia Motors is Wracked with Labor Disputes

"After the company went bankrupt in 1997 all the union members left their worksites. But the company was just barely taken over to Hyundai Motor. Thank goodness! We now have jobs at Kia again... But should we keep waging a war of attrition almost every day? Foreign cars in the W20 million price range are being imported. Vehicles made in China will flood the market. How can we survive tomorrow...?" This plaintive message was posted on the Kia union's homepage by a union member late last year. Kia is now experiencing its worst crisis since it was handed over to Hyundai in 1998. Sales of its new models such as Lotze and Cerato have been sluggish. Due to the strong won, exports are also on the decline. Last year Kia incurred a deficit of W125 billion, its first since 1998. The loss was no surprise; experts had predicted the deficit given that Kia's profitability has decreased drastically since 2003 when it netted a profit of W805.5 billion.

One reason for Kia's woes is the appreciation of the won. Another reason is that rising diesel prices have caused sales of SUVs, like Kia's Sorento, to dwindle. But it is generally believed that the core problems lie in Kia's chronic labor disputes and management's weak hold on the situation. Over the past four years Kia has seen the number of labor disputes increase year by year. There were just six days of labor disputes in 2003 but that number increased to 21 last year. Production losses caused by labor unrest amounted to W730 billion last year.

Meanwhile, Kia affiliates are in agony. "Over the past months, we've gotten 20 percent fewer orders for car components than before," said an executive of a Kia affiliate. "There's a growing sense of crisis among us affiliates."

(englishnews@chosun.com )

Edited by SoCalCTS

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It's good to see Daewoo do well.

The only thing I need to see as how well the products last. ( They didn't fare well under the old Daewoo)

Though it is looking like products like the Aveo seem to be doing well...

Kia issues might hurt them in NA though...

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Hey, Kia, you know what would help?

If your cars weren't so damn ugly.

I don't get the chance to gloat often. :P

...or built better than a 1960's fiat.

Chris

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...and yes it is good to see daewoo do well. My mother drives a Chevy Aveo and I think it is made by Daewoo.

Not a bad car for the $.

Chris

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