| In October 2002 Nick Reilly became president
and chief executive officer of GM Daewoo in Korea, responsible for GM Daewoo’s
manufacturing, distribution, and sales operations around the world. Reilly
is no newcomer to the company, joining General Motors as far back as 1975.
He says it was the constant moving around and the sheer variety of positions
that has kept him in the same organisation for so long. Now it has all come
together and he is in charge of a whole company. Nargess Shahmanesh caught
up with him at the Frankfurt Motor Show.
Nick Reilly,
Daewoo CEO, has high hopes for the Korean-GM-owned brand |
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Daewoo has been re launched under GM as a brand focussing purely on small
and compact-sized passenger cars that Nick Reilly, president and chief
executive officer, readily admits draws upon the strength of the Korean
carmaker. “However, this doesn’t mean that it’s all
we can do,” he says. “GM has been a huge success around the
world, but it does have problems, particularly in some markets of the
world and perhaps in the value end of the business.”
Although Opel and Vauxhall, GM’s European brands, produce a range
of small and compact cars, Reilly does not see any conflict of interest.
“We have several dealerships now that have the same franchise for
Opel/Vauxhall as ours,” he says. “If you talk to them, they
say there tends to be a different clientele for the brands.” He
thinks that in a way this is a positive thing as it gets the customer
into the GM fold where they may move from a Daewoo to a Vauxhall or Opel.
“There is bound to be a little overlap, but altogether it is pretty
complementary.”
One of the major attributes is its value – car for car a Daewoo
is probably priced around 10 per cent bellow some of the mainstream brands,
but its export image is very different to that in its domestic market.
“In Korea we are a mainstream player,” says Reilly. “We
have 25 per cent of the market in the segments that we compete in, so
there the value side of it isn’t so strongly stressed.” In
Korea, Daewoo could even be conceived as a sexy brand, he adds.
While small and compact cars form the key part of the range, Daewoo is
still aiming at introducing an SUV model in Korea and perhaps a few other
markets. “We need a large car in Korea,” says Reilly, explaining
that such a vehicle will have a more expressive styling rather than the
more traditional Korean SUV design. “We think there is a sufficient
market for this kind of car and we would like to see ourselves as setting
a trend.”
North America is an important market for the Korean carmaker and while
it could not hope to export any SUV there, Reilly is confident that other
models from Daewoo will be well received – except that they will
not be called Daewoos. He explains that the branding strategy there is
a little complex following the damage done to the brand when it was going
through serious financial upheavals under the last owners. As a consequence,
Daewoos will therefore be badged as either Suzukis or Chevrolets, depending
on the product.
“Chevrolet didn’t have anything in the small car sector so
the Kalos is going out as a Chevrolet in the US and Canada,” he
says. “The larger models are going out under the Suzuki badge as
it already has smaller cars. So it fits perfectly – and we are offering
a very competitive price.” This seems to be a serious case of badge
engineering that it is also employing in Asia Pacific where Daewoo is
going to be vital for GM.
Chevrolet does not have anything in the small car sector in North America so the Kalos is being branded as a Chevrolet in the region |
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“China in particular is very important for us,” says Reilly,
“but here we don’t use the Daewoo brand as it has never been
in China.” Instead GM has Buick and Chevrolet which are also growing.
“We can use those brands and do not have to establish new distribution
networks,” says Reilly. Daewoo began assembling products there in
August.
South America is a little trickier for Daewoo. “We are talking to
Venezuela and Columbia at the moment,” but he adds that duty rates
are high in the region and unless you manufacture there, it is not necessarily
economically viable. The Middle East market is much more promising. “We
have had tremendous feedback from Israel, Saudi Arabia and some of the
other countries there,” says Reilly, where the Chevrolet brand is
being used.
Across Western Europe, where a Daewoo is a Daewoo, nearly 200,000 units
were sold in 2000 before they fell away with the company’s problems.
Reilly predicts that sales will reach 150,000 units this year, up from
100,000 in 2002 and will be close to 200,000 units by the end of 2004.
This success mainly comes from re-establishing networks in countries where
they have more or less collapsed. “We have had to create a new distribution
channel in central and Eastern Europe, and in some places we have had
to start all over again,” he says. However, it is in these countries
that Daewoo is starting to grow. “We should get close to 200,000
sales next year. After this, we will have to go significantly ahead of
that, but we are looking more at 2005-2006 because this is when we will
bring diesel engines in,” he adds.
GM took over Daewoo for it to become an important part of the GM family,
explains Reilly. “We have the opportunity to supply a certain type
of product for the worldwide needs of GM. It also means that we will have
enough volume and sales that we can have a strong presence in Korea itself,” says Reilly.
While it may seem logical for a carmaker like Daewoo to have had a diesel
engine by now it has to be remembered that during the period of near bankruptcy
it was unable to invest in new technology. When Reilly is asked what he
is doing to rectify this, he responds by saying that discussions are already
being held with GM about its joint diesel engine venture with Fiat.
“No matter what, we will have a diesel engine one way or another,”
he says. “Unfortunately, it takes time for it to go through.”
With diesel’s rising popularity in Europe, it will definitely help
sales there although as Reilly points out, with Daewoo's product price
range, customers do not actually have to go to diesel to save money. “However,
we have to have diesel engines as it could give us another 30 to 40 per
cent market share.”
While Daewoo no longer owns the Worthing technical centre in the UK, it
does not see itself re-establishing a major European engineering centre
in the near future. “We are concentrating in Korea and building
up a major technical centre there,” says Reilly. However, Daewoo
engineers can and do access information and know-how from the various
GM group technical centres. They can also use the marketing skills in
order to get feedback as to what is important in the European and US markets.
In Korea, Daewoo has also hired around 300 engineers this year as well
as investing a couple of million of dollars in design studios. “We
are localising the development of our products in Korea,” says Reilly.
Daewoo has had a strong history of using ItalDesign for exterior styling.
In fact, as Reilly points out, only interior design used to be an in-house
job. Although the relationship remains close and they are currently working
on a project together, Daewoo will be taking more of its exterior designs
in-house in the future and has just appointed Mike Simco, formally heading
design at Australia’s Holden, as its new design chief. “He
is an excellent designer and has had some big successes at Holden,”
says Reilly. Simco’s role will be to head up Daewoo’s design
direction for the next few years. “We have some good people, but
they don’t necessarily have the international experience as yet.
“We tend to be a bit more expressive than our main competitors like
Hyundai who are fairly traditional and middle of the road.” He sees
the carmaker as perhaps becoming a little innovative in styling in the
future. “We have had a history of more adventurous styling than
some of the others and we think can grow there.”
Reilly admits there has not been a real identity but there is a reason
for that he argues: “Korea only has four big manufacturers that
between them have 98 per cent of the market. If you are very Korean focused,
you don’t actually try to have a brand identity,” he says.
“You try to differentiate amongst your models to get a difference.” On the other hand, in the export market, particularly Europe, where Daewoo
has only around one per cent of the market, it needs to have a strong
brand image.
Daewoo produced around 450,00 cars in 2001 before running down. This year,
Reilly predicts hitting around 600,000 units and close to 800,000 next
year. “The year after it should grow even further as we will have
new products,” he adds. “If we do things right, we should
have a couple of years of strength ahead of us and we should be making
well over double of what Daewoo was doing before, and even perhaps triple
of what we got down to in the end.”
Daewoo, he adds, needs to see itself as utilising its full capacity. This
means making around a million cars in order to have a sustainable future. “We have a fairly strong chance to maintain our position and be
able to make money on small cars,” he adds.
So does he have any regrets? “No it’s the other way around
so far,” he says. “We are ahead of our plans in most aspects.”
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