Broken Strategic Alliance: A Case of Daewoo-GM Joint Venture

Abstract

The history of Daewoo Motor Company Ltd can be characterised by a series of hand-overs. Its predecessor, Shinjin Motor Company Ltd was established in 1965 by the acquisition of Saenara Motor Company Ltd. By its technical collaboration with

Toyota of Japan, Shinjin Motor, as a manufacturer of Korea's first sedans, expanded both its facilities and production. In the 1960s, the company had become the industry's front runner in Korea with over 50% of the domestic market. General Motors (GM) of the United States bought into the South Korean automobile industry in January 1972, when it picked up Toyota's stake in Shinjin Motor. Toyota was looking to do business in China and was obliged by Peking to withdraw from its South Korean investment. Shinjin entered into a 50-50 joint venture with GM, and changed its name to General Motors Korea (GMK). However, in 1975, GMK's market position in the passenger car segment eroded due to the competitive move by Hyundai Motor which captured a substantial share of the market by its introduction of the fuel-efficient subcompact called "Pony". Unhappy with Shinjin's management, GM, in 1976, asked the US Embassy in Seoul to persuade the South Korean Government to find it another partner. In the same period, the Shinjin group experienced financial difficulties and its shares in GMK were sold to the government owned Korea Development Bank. The name of the company was subsequently changed to Saehan Motor Company Ltd.