The Fall of Daewoo Motors

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.

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."² 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 of negotiations with the Korean government, GM signed a preliminary agreement in September 2001 to buy Daewoo's assets for $1.2 billion. However, this agreement ran into problems when GM reported a discrepancy in Daewoo's overseas accounts. With so many skeletons in Daewoo's closet, market observers wondered when the company would find a buyer and when its problems would be solved.