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Daewoo Close to Folding U.S. Sales Arm; AIADA Urges GM to Protect Daewoo Consumers, Dealers

May 1, 2002

Korea's Daewoo Motors appears close to selling its last car in the United States, three-and-a-half years after entering the market, according to Reuters.

General Motors' April 29 agreement to buy key assets of the bankrupt Daewoo, after protracted and contentious negotiations, did not include the U.S. sales unit Daewoo Motors of America, threatening the future of its 525 U.S. dealers and thousands of employees.

However, GM said that provisions have been made to ensure that the warranties on Daewoo vehicles

sold in North America will be honored. The Detroit automaker also left open the possibility of importing Korean-made vehicles to the U.S. market, but selling them under a GM brand name such as Chevrolet or Pontiac.

"Daewoo America and its distribution network is not included in the transaction," said Nick Reilly, a GM executive who will become head of the new company to be formed from the old Daewoo Motors. "In the U.S., the awareness (of the Daewoo brand) is very low and the equity of the brand in terms of (vehicle purchase) consideration is very low."

"It is a sad day for consumers in America and the franchise system," said Walter E. Huizenga, president of the American International Automobile Dealers Association (AIADA). "Daewoo dealers have demonstrated a unique ability to

successfully retail Daewoo automobiles under the most extreme market conditions. GM is missing a wonderful opportunity in this market, and has left 525 U.S. dealers and their employees out in the cold. Unless something

is done to protect the consumers and the dealers, protracted litigation is almost a certainty. Both GM and Daewoo Motor need to address the significant and serious needs of these dealers in order to provide an orderly and fair transition," Huizenga said.

In an effort to avert the threat to Daewoo's U.S. dealer body, AIADA contacted the leadership at GM, urging them to keep the Daewoo dealer body intact. Additional contacts were made to officials within the Korean government, including the Office of the President and the Ministry of Finance and Economy, according to AIADA.

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