GM’s South Korean unit Daewoo to post its first annual profit since 2007

Article by Christian A., on December 18, 2010

Mike Arcamone, chief executive officer of GM Daewoo Auto & Technology Co., recently told reporters that GM Daewoo, General Motors Co.'s Incheon, South Korea-based unit, had a “very profitable year.” GM Daewoo is seen to post its first annual profit since 2007, as helped by rising exports to Eastern Europe and other emerging markets.

According to Arcamone, GM Daewoo will likely increase vehicle shipments, including unassembled cars, by 17 percent this year to more than 1.8 million units. This surge is helped by increased demand for vehicles produced at GM Daewoo such as Spark minicars, Alpheon sedans and Chevrolet Cruze compacts.

In 2008 and 2009, GM Daewoo incurred heavy losses because of wrong-way bets on currency hedging as well as slower sales amid the global recession. Arcamone remarked the carmaker is planning to launch seven new models by the end of 2011. The carmaker is also planning to start selling Chevrolet cars in South Korea in 2011.

Arcamone, who was appointed in 2009 to turn around the money-losing unit, has set his sights on increasing GM Daewoo's market share in South Korea to more than 10 percent this year. He says that, GM Daewoo expects to sell more than 750,000 vehicles this year. The figure excludes exports of unassembled vehicles. According to a statement, the GM Daewoo sold 680,305 vehicles in the first 11 months of 2010, which is around 33 percent more than a year earlier.

GM Daewoo traces its roots in 1937, when it was first established as National Motor in Bupyeong-gu, Incheon. It was renamed to Saenara Motor in 1962, assembling and selling the Datsun Bluebird PL310. When it was bought by Shinjin Industrial in 1965, Saenara Motor was renamed to Shinjin Motors. When the Daewoo Group assumed control, Shinjin Motors was officially renamed as Daewoo Motor.

In 1999, the Daewoo Group ran into financial trouble and started look for buyers for its automotive division. GM Daewoo Auto & Technology was formed in 2001 when General Motors bought most of the assets of Daewoo Motor. GM Daewoo commenced operations on October 17, 2002. At the time, GM and partners Suzuki and SAIC held a stake of 66.7 percent, and had invested $400 million into the newly formed company. Korea Development Bank and several other Korean creditors held the remaining 33.3 percent, with investments of $197 million. The transaction, excluded around 15 factories, including Daewoo's Bupyeong-gu plant.

As of this year, General Motors and SAIC owns 82.9 percent and 9.9 percent of GM Daewoo, respectively. The Daewoo Motor Creditors Committee holds the remaining 7.2 percent.

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Topics: gm, south korea, profit

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