Roots of Failure at Daewoo

Topics: Chaebol, GM Daewoo, Daewoo Pages: 4 (1054 words) Published: January 22, 2011
Roots of Failure at Daewoo Motor America

Roots of Failure at Daewoo Motor America
In 1996, Daewoo “became the world’s largest transnational entity among emerging economies (Kim 2008. P. 277).” At the end of 1999, the Daewoo Group “collapsed in spectacular fashion (Kim 2008. P. 273).” Daewoo had entered the American car market in the late 90s by leveraging its global success along with Korean rivals Kia and Hyundai. In May 2002, following General Motors decision not to acquire the assets of Daewoo in the United States, Daewoo Motor America filed for bankruptcy protection (O’Dell, 2002). During four years of operations, Daewoo Motor America only sold 160,000 cars (O’Dell, 2002) that then had uncertain warranty coverage and parts supply. Business failures are complex to analyze and are caused by a multitude of factors, but a look at Daewoo’s leadership, management, and organizational structure indicated trouble. Leadership

Kim Woo Choong is the Chairman and founder of Daewoo. Other Korean chaebols, or conglomerates, like Hyundai and Samsung have transitioned leadership to second and third generation family members; however no family relations are in key positions at Daewoo (“Mr. Kim’s one-man empire”, 1996). Mr. Kim also shows “little sign [he] trusts his professional managers any more than his own family (“Mr. Kim’s one-man empire”, 1996, p. 56).” This leadership style does not provide for the independent decision-making required to run a multi-national corporation efficiently, nor does it provide any succession plan for Mr. Kim. An outsider may also question if the normal checks and balances exist within the company, or if Mr. Kim’s decisions go unquestioned. This could present a problem if the ethics of the leader are in question.

In 1996, a total of 33 people were sentenced in Korea’s massive corruption trials (Hardie, 1996). Among them was Kim Woo Chong, Chairman of Daewoo Group and Lee Kyung Hoon, chairman of Daewoo America. Mr. Kim...
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