GM needs big cars to drive Daewoo sales higher

SEOUL, April 11 Reuters has published a story that reported General Motors Corp needs to bring big cars into South Korea, especially sport utility vehicles (SUVs), to help bankrupt Daewoo Motor Co catch up with its domestic rivals, analysts said on Thursday.

Aiming to secure a foothold in one of Asia's fastest-growing markets, the world's largest automaker said on Wednesday it was close to finalising a takeover of the core operations of Daewoo, South Korea's third largest automaker in terms of sales.

But GM also stands to take a piece of an automaker which offers no SUVs and cars that consumers feel are basically little changed from the models introduced years ago.

``Koreans made money in the stock market and they want to buy cars...big cars,'' said Don Shim, an auto analyst at KGI Securities.

Daewoo operates four production plants in South Korea, while GM is expected to buy only two of Daewoo's four domestic plants. The Kunsan and Changwon plants, which GM intends to acquire, have a combined production capacity of 540,000 vehicles annually and manufacture mostly compact and subcompact passenger cars.

``Mini cars sales may look good in numbers, but not in terms of money,'' said Koo Zayong, an auto analyst at Deutsche Bank.

SUV KEY

But more importantly, Daewoo, needs to roll out an SUV, analysts said.

``Daewoo does not have an SUV and they only have one RV (recreational vehicle), which is the fastest-growing segment in sales here,'' said Song Sang-hoon, an auto analyst at Dongwon Economic Research Institute.

Sales of SUVs and other recreational automobiles rose to over 400,000 units in 2001 from around 32,000 units in 2000, according to the Korea Automobile Manufacturers Association (KAMA). In contrast, passenger car sales rose by only 7,541 units over the same period to slightly over a million vehicles.

Hyundai Motor Co (05380.KS), the nation's largest automaker, offers the widely popular Santa Fe SUV, while others are rising in popularity.

Daewoo only offers the Rezzo minivan, which is sold in the United States as the Tacuma.

MARKET SHARE DOWN

Daewoo's financial troubles over the last several years have lowered its share of South Korea's auto market, which accounted for 1.45 million vehicles in sales last year.

Daewoo Motor's share of the domestic auto market fell to 10 percent at the end of March from a peak of 31 percent in 1998, according to KGI Securities.

In contrast, rivals Hyundai Motor Co and affiliate Kia Motors Corp (00270.KS) boosted their combined slice of the pie to 74.6 percent from 59.4 percent over the same period.

``The competitiveness of Daewoo Motor's products has declined a lot over the last four years,'' said Sohn Jung-won, an auto analyst at Good Morning Securities.