In the late 1990s, the leading South Korean car manufacturer, Daewoo Motors (Daewoo), was in deep financial trouble. For the financial year ending 1999-2000, Daewoo generated revenues of $197.8 million and a net loss after tax of $10.43 billion (13.7 trillion won).
The company's revenues had dropped by 94% since 1999. The loss reported was also three times higher than that reported in 1999, and was ranked as South Korea's largest ever corporate loss. In addition, the company's domestic marketshare fell from 33% in 1998 to just 23% in 2000. According to analysts, Daewoo's borrowings for its expansion programs were responsible for its losses. The company's domestic and foreign debt amounted to more than $16.06 billion in December 1999.
Moreover, its expansion into risky and uncertain markets like Vietnam and its decision to sell products at very low prices to gain marketshare had negatively affected its financial condition. Labor unrest was also one of the reasons cited by market observers for Daewoo's poor financial performance. The workers at many of its plants went on strike protesting against low wages, layoffs, and lack of job security. The Southeast Asian Financial Crisis of 1997-98 further deepened Daewoo's problems. The company's creditors started demanding repayments.
However, some analysts felt that the primary reason for Daewoo's problems was mismanagement and the corrupt corporate governance practices adopted by Kim Woo Choong (Kim), the founder of the Daewoo Group. An analyst commented, "The ill management and inability of Daewoo companies resulted in bankruptcy. The run-away irresponsible previous owner, Kim is now hiding somewhere in the world." Analysts commented that because of his financial mismanagement, not only Daewoo but also the entire Daewoo Group was deep in debt.
In November 2000, the Korean government officially announced Daewoo's bankruptcy and its assets were put on sale. Amid controversies and almost a year... [continues]
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