The document summarizes a strategic alliance formed in 1984 between GM and Daewoo to establish a joint venture called Daewoo Automotive Components (DAC JV) to manufacture vehicles in South Korea. Both companies invested $100M. The alliance aimed to help GM expand in Asia while providing technology and a new market for Daewoo. However, disagreements over wages, quality, and market expansion led the alliance partners to dissolve their relationship in 1992 when Daewoo bought out GM's stake.

1. A Strategic Alliance GM and Daewoo

2. Joint Venture Highlights Daewoo Automotive Components “DAC JV” got formed in 1984 Alliance between Saginaw Division of GM and Daewoo Motors Enable GM to establish a manufacturing presence in the Asia Pacific region. To manufacture “LeMans” vehicle assembly in South Korea Both invested $100m in a 50/50 JV

3. Organisation Chart

4. About Saginaw : “GM” Korean Division Components division of GM Major Profit center for GM Supplied components to GM (including Opel), Chrysler, and Toyota Became source of “LeMans JV” for GM’s request Competed with Hyundai’s “Mando” component division

5. GM Objective To provide financial returns (dividends, royalties, source plant profits) Support Overseas programs (specifically the Pontiac LeMans JV) To support GM’s cost, quality and capacity for NA market Become a low cost manufacturing source for product and manufacturing in South Asia Pacific region To penetrate strategically significant emerging market To learn about key market characteristics To understand design preferences in the Asia Pacific region To compete successful Asian imports in NA market To supplement GM’s product offerings on a global basis

6. Daewoo Objective To tap export market opportunities New technology and Engineering Skills needed to compete effectively in the domestic market To supplement GM’s product and offerings on a global basis To produce for other vehicles in the domestic Korean market Compete “Mando” division from “Hyundai”

7. Joint Venture Highlights (cont’d) GM (Saginaw) provided Technology Process Knowledge to manufacture and assemble component Daewoo provided Manufacturing facilities Management of daily operational activities Labor GM (Saginaw) maintained its “rights”, to access the market opportunities for DAC components outside of Korea.

8. Joint Venture Highlights (cont’d) Existing Daewoo Motors facilities were converted into DAC manufacturing facilities A Board of Directors (BoD) formed Comprised of 12 members, 6 from each parent To stamp final authority on decisions affecting business To review and approve all business plans and strategies Daewoo’s original management team retained, Provided day-to-day management services to DAC in return for a management fee. GM placed one person in the Korean facilities as a manager of DAC To protect the interests of GM during DAC’s daily activities.

9. Evolution of Events 1987 South Korea had become a democracy Workers demanded in wage increases Frequent delay at LeMans production plant Daewoo responded by doubling wages ( overall 215% increase) Quality issue “ LeMans” production became costlier compare to “Opel” produced in Germany plant GM disapproval with Daewoo

10. Evolution of Events (cont’d) Daewoo was equally frustrated with GM Daewoo Group Chairman Mr. Kim complained that he was treated shabbily and GM executives were arrogant GM did not allow Daewoo to expand their market in the US or Eastern Europe Did not want to allow Daewoo to double capacity

11. Available Options to GM GM has 3 options Dissolve the relationship Maintain the status-quo, Change the way the JV operates

12. Recommendation We recommend that GM should continue in the JV A learning opportunity for GM “ To better understand”, how to manage future joint ventures

13. How ? To implement a better organizational and administrative structure Dedicated resource to restrict The flow of proprietary knowledge analysis Management of financial returns Improvement of DAC’s Allowing DAC to export components To build better quality Learn from their partner.

14. Result Inability to build cohesive strategy for operations of the JV made both parties to dissolve the strategic alliance Daewoo bought GM’s interest in 1992

15. Questions

16. Was alliance proved strategic to both companies?

17. What went wrong? “ Hyundai” competitor to Daewoo, had larger car market share in Korea “ Mando” an “Hyundai” chassis division existed before initiation of the DAC joint venture GM never made an effort to sell “DAC JV” products outside Korean market GM restricted Daewoo to export outside Korean market GM assumed that “Korean” and “Asian” market were synonymous DAC’s natural desire to grow, created possible threat to GM’s Saginaw

18. Post JV Events A Decade later GM bought Daewoo

19. Participants Detail Group 7 Bharat Sharma -5009 David Thomas -5013 Bobby Chacko -5031 Nirmala Gilbert -5014 Fahad Siddiqui -5018