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Interview: Nick Reilly CEO, GM Daewoo

Last time Automotive Engineer spoke to Nick Reilly was exactly two years ago at the IAA Show, when Daewoo had just formed a joint venture with General Motors. Nargess Shahmanesh-Banks caught up with the Daewoo boss once again at this year's show.

Company boss, Nick Reilly has helped turn GM Daewoo around

GM Daewoo Auto and Technology Company, the joint venture between the two carmakers has since become one of the US giant's major product supply and development centres. "It has gone very well in general," confesses Reilly who has been running the company for nearly three years.

South Korea's economy has been experiencing a relative depression in the last few years and as a result the bulk of profit has been from the export market. "We have expanded from about 400,000 to a little over 1.1 million export cars which we will sell around the world this year," he boasts, adding: "It has been better growth than we expected." Furthermore, the expansion has been all over the world; in North and South America, Europe, China, Middle East and Africa. "Our engineers have been very busy getting cars ready for all these countries."

"We sell the same products all around the world, but they are not always called Chevrolet. In Korea for example they are still called Daewoo, in China some of them are called Buick and in the US some of them are called Suzuki," says Reilly, admitting that it can get a little confusing at times.

Simultaneous to the market expansion, Daewoo has been investing a lot in product and development. "When the old company went bankrupt, we simply stopped investing," he admits. "So we have had to fill-in some of the gaps in our portfolio. For example, we didn't have a SUV, nor did we have a diesel engine, so we have had to invest in these areas and they are coming on stream now."

It makes sense to benefit from the pool of know-how on offer from GM, but interestingly enough the diesel engine wasn't initially done in collaboration with the US giant mainly because at the time GM and Fiat had a joint powertrain venture in Europe and Fiat didn't want Daewoo to use the engine. "We compete quite strongly with Fiat," notes Reilly. However with the SUV, although made in Korea, much of the technology was shared with GM.

"We are getting closer and closer to GM," he says. "We were never quite sure how fully integrated we were going to get. As confidence in the capabilities of the company has grown, we now do quite a lot of engineering work for GM. For instance we have recently been named the centre of expertise for all GM sub-compact cars for the world," he boasts. "We are going to develop the architecture for it and then other car companies will skin it in different ways depending on what the brand is." The deal that was announced a couple of weeks ago will be effective for the next generation of GM sub-compact cars before the end of this year.

Although this is a huge deal for Daewoo from an engineering point-of-view, the company also has a whole range of cars that it is working on. "We develop all our own brand cars, for Chevrolet or Daewoo, but sometimes we borrow the architecture from somewhere else in GM," says Reilly, admitting that his company's main expertise is in the smaller car segment. "We try to leverage what is sensible to leverage and keep unique what is unique. It's a balance between the two," he says.

The diesel engine Daewoo is about to bring out next year is a brand new engine. "We are also bringing out the new six-speed automatic transmission which is going to be built in Korea. However, we will not be working on technologies like hybrid and fuel cells on our own. We are involved, and our engineers are working alongside GM's engineers via the GM route mainly because it is very expensive technology. We are involved but not the leader in the area," says Reilly. The technology, though, will filter into Daewoo cars though in the future and there is even a chance of a hybrid car. "We are intending to build one in early 2007."

Conquering new land

"GM's participation in the Asian Pacific markets used to be only 3 per cent, but we have risen that already to 6 per cent and nearly all of this has come from our products in the different Asian markets, in particular China," says Reilly.

Daewoo entered the Chinese market quite early on and has grown with the market as well as increasing market share in the last couple of years. "We are doing big volumes there now," he boasts. Daewoo sells its cars there under the Chevrolet and Buick badges. Buick, in particular, Reilly explains has a strong brand heritage there. "The government officials all drove Buicks so it’s a brand that has always been well known," he says. Daewoo cars are designed specially for China. "There are some peculiarities with the Chinese markets we have to get right."

The Chinese it seems benchmark the Koreans when it comes to cars, perhaps in the same way the Koreans do the Japanese. Reilly agrees: "There is a pretty good relationship between China and Korea, a much better one than with Japan for either countries. It's not difficult to do business in China and the Chinese certainly have no problems buying Korean goods. "We have been copied, but you have to live with that and understand that it isn't against the law there. In a way you enjoy the flattery and you have to understand that they play by slightly different commercial rules. You have to adapt as there is no point complaining about it. There are a lot of opportunities there and the market will keep growing," he says.

Warming to the Chinese theme he continues: "It would be really interesting to see how long it will take the Chinese car manufacturers to begin export. A few of them have already started but right now the products from most of the local Chinese companies aren't strong enough to go on the world market, but it probably won't take them too long before they catch up."

With China steeling the limelight, it's easy to forget the potency of India as a viable future market for companies like Daewoo. Unlike China, India has a strong supplier network and a democratic government with fewer idiosyncrasies. Reilly agrees: "I am very interested in the Indian market," he says. "I think it has tremendous potential. We are growing there now but from a tiny base." His group have been trying to buy an old Daewoo factory there in the south west of Delhi. The unused premise, which even has an engine plant, went completely bankrupt in the Daewoo crash and because it is wrapped up in Indian bureaucracy, Daewoo is finding it near impossible to make something of it. "The creditors think they should get it, the tax department think they should get it, they owe a lot of import duties, but there is definitely a huge opportunity there," he says hinting at the possibility of manufacturing in southern India instead where the bulk of car making takes place.

"Suzuki does extremely well there. India won't be the size of China for some time but the car industry will certainly grow," says Reilly. With mini and compact cars taking care of 75 per cent of the market share, Daewoo has the right products for India and for this market Chevrolet is the badge of choice. "GM India is already producing what we call the Kalos here, but what we would like to do is to produce the mini car, what we call the Matiz in Europe and the Spark in some parts of the world."

Asked about Iran, Reilly says: "We could have sold a lot of cars in Iran but being part of GM, the US government doesn't deal there. We are starting to sell a few cars in Iraq though, which used to be off the list."

Daewoo is more or less present everywhere else in the world. In South America, Chilli is one of its major markets as is Columbia. "We are not so strong in Brazil though," says Reilly. "GM has already got a stronghold there, though not using our products, not yet anyway."

Only this year Daewoo cars across Europe found themselves re-badged as Chevrolets, with uncertain critical reaction. However, despite the initial scepticism, the brand has gained a 22 per cent market share here. "We are getting some new customers who would have not considered buying a Daewoo," says Reilly. "The Chevvy badge is okay, the Daewoo one is not okay. At the same time, we are still trying to hang on to old Daewoo customers and that might prove to be the more difficult one." What he's finding is that the old Daewoo customers are turning up to the new more swanky Chevrolet dealerships and finding it a little too fancy and market. "It is difficult for us to ask someone to make their dealership more down market," says Reilly. "It's something that I won't do. We will lose a few people but so far we are going in the right direction."

Even though Chevrolet is very much a badge for the average Jo in the US, here in Europe at least it conjures up a certain romantic vision of Americas Beat Generation, the lost world of Jack Keroac's On the Road. The Daewoo cars turned Chevrolet however are in complete contrast to this vision. Reilly warms to the idea of designing Chevrolet cars that are more Chevvy than Daewoo. "Our SUV for next year is a great looking vehicle that will fit the Chevrolet badge perfectly," he promises. "The styling is getting more expressive and bold rather than being the traditional old Asian standard box design. The new cars that you will see coming out are more Chevrolet than Daewoo."

Asked about the verdict so far, Reilly replies: "There are always issues and problems which is what you get paid for. One of the main concerns is to keep a lid on our costs. It would be easy to let it drift up, to let that get out of control. Part of the success we have had is to be able to hit a particular price point which is something GM has historically not been unable to do and then give the products to an existing distribution channel," he says. "We have been feeding the products to them and it has been doing really well. If ever our costs levels reach the average level then we are not doing well."