Roots of Failure at Daewoo
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
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
References: Hardie, C. (1996). Top Samsung, Daewoo execs. guilty. Electronic News, 42(2132), 8-9. Retrieved from EBSCOhost Document ID: 9609172563. Kim, J. (2008). A Forensic Study of Daewoo 's Corporate Governance: Does Responsibility for the Meltdown Solely Lie with the Chaebol and Korea? Northwestern Journal of International Law & Business, 28(2), 273-340. Retrieved from ABI/INFORM Global. Document ID: 1477230331. Mr. Kim 's one-man empire. (1996). Economist, 338(7950), 56-57. Retrieved from EBSCOhost Document ID: 9602057715. O 'Dell, J. (2002, May 21). U.S. Daewoo files for bankruptcy protection: Move follows Daewoo 's bankruptcy in South Korea, no word on impact on company 's Canadian operations. Edmonton Journal. Retrieved from ProQuest. Document ID: 222031651 Rechtinm M. (1999, December 6). Daewoo to sell factory stores in 3 states. Automotive News. Retrieved from EBSCOhost. Document ID 47240069 Rechtinm M. (2000, September 25). Daewoo shift adds to budget. Automotive News. Retrieved from EBSCOhost. Document ID 60965733. Siano, J. (1998, July 19). Daewoo, of Korea, gives America the old college try. The New York Times. Retrieved ProQuest. Document ID: 32090921.