The origins of the Daewoo Motor Company go back to the very first automobile company in Korea—National Motor—started in 1937. The company operated under that name until 1962, when it was changed to Saenara Motor. Saenara built the Datsun Bluebird under license and sold it in Korea. Saenara was established under the Automobile Industry Promotion Policy enacted by the South Korean government to help Korean automakers dominate their home market, as well as build up the nation’s economy and infrastructure following the Korean war.
Under the policy, foreign automakers were forbidden from operating in South Korea—unless they worked with an established South Korean manufacturer. Saenara partnered with Nissan and became the first Korean automaker to benefit from a modern assembly plant. Shinjin Industrial bought Saenara in 1965, which changed the name of the company to Shinjin Motors and entered into an agreement with Toyota.
That arrangement lasted until 1972, when Toyota withdrew from the collaboration and General Motors stepped in, under the name General Motors Korea. However, four years later, the company was rechristened Saehan Motor in 1976.
Meanwhile, the Daewoo Group was founded in March of 1967, named for its founder Kim Woo-choong. In the Korean language, the word “Dae” translates to “Great”. “Woo” came from the founder’s last name, which also means “Universe”. Thus Daewoo = Great Universe. His father ultimately became a provincial governor and Kim benefitted from a policy established to promote growth and development in South Korea. Much as the Automobile Industry Promotion Policy did for the Korean car industry, similar policies were put in place to help entrepreneurs in other areas of business by increasing access to resources, promoting exports, financing industrialization, and providing protection from competition in exchange for political support.
During his childhood Kim’s family was pretty poor. Getting his start in business as a newspaper delivery boy at the age of 14, that newspaper delivery job pretty much supported his family. However, his father had done much to help the former Korean president Park Chung Hee—before he became president. Once he was in power, Park, in turn, helped the adult Kim with his business endeavors.
After college, Kim went to work at Hansung Industrial Co., Ltd., a company owned by one of his relatives. Six years later, he borrowed $10,000 to establish Daewoo Industrial Co., Ltd., a textiles trading business. With government protections and government-sponsored cheap loans, Daewoo started out producing clothing and textiles. Over time though, the government encouraged its entrepreneurs to become more aggressive and pursue growth outside of Korea.
In response, Daewoo partnered with U.S. and European corporations, expanded into machine tools, defense products, aerospace interests, and semiconductor design, in addition to manufacturing. Eventually, Daewoo got into building civilian helicopters and airplanes too. Growing his company largely by acquisition, Kim would find companies that were in trouble, bring them into the Daewoo fold, and turn them around. Ultimately Daewoo employed some 320,000 people in 110 countries.
Kim got Daewoo into automobile manufacturing in 1982, buying out Saehan Motor, but keeping the General Motors partnership in place. From 1982 to 1996, all Daewoo cars were based on products from General Motors, although the formal partnership with general Motors ended in 1992. This left Daewoo Motor Co. as an independent manufacturer. Its first product on its own was the 1996 Daewoo Lanos. The Daewoo Nubira and the Daewoo Leganza—all three of which were imported into the United States and sold under the Daewoo nameplate, followed in 1997. Sadly, all were saddled with reliability issues, as well as just generally being wrong for the U.S. market.
As we mentioned before, Kim grew his company by acquisition. Like so many businesspeople pursuing this strategy, it was all done on credit—much of which was in the form of government support. When the 1997 Asian financial crisis hit, panic among lenders led to a large withdrawal of credit from the crisis countries, causing a credit crunch. This made it difficult for consumers to purchase big-ticket items. Further, the political environment had changed; Kim’s benefactor was no longer in power. Also the government was running deficits, so funneling money to a company like Kim’s was off the table. Without a strong and steady cash flow, entrepreneurs like Kim, who had a lot of debt to service ran into trouble.
By the 1990s, Daewoo Group was heavily leveraged, its major markets were stagnant, its expenditures on R&D were increasing, labor unrest was a significant issue, and government policy was turning against the company. In 1999, in order to preserve his company, Kim had to sell off a large number of assets, one of which was Daewoo Motor. General Motors bought it, and renamed the enterprise GM Daewoo. Daewoo cars were largely rebadged as Chevrolets and offered around the world. Two of them even came to the United States in the form of the Chevrolet Aveo and the Chevrolet Sonic.
Before the Asian financial crisis hit, Daewoo Group was South Korea’s second largest corporation. The group had more than 50 divisions. As of this writing, only six companies remain with the Daewoo brand name. As for Kim himself, he left South Korea in 1999 as his company was collapsing under some $65 billion in debt. Vilified by former employees and branded a criminal by a judge in Seoul, Kim says he was told to leave the country by the president so the restructuring of the company could go more easily.
Meanwhile, some 20 Daewoo executives and accountants were convicted of fraud in 2001 and served six months in jail for inflating company assets by $30 billion in 1997 and 1998. And while Kim's attorney says the correct total is $12 billion, the fact remains the company was guilty of defrauding investors. Kim returned to South Korea in 2005 and was promptly arrested. In May of 2006, Kim was sentenced to 10 years in jail after being convicted of charges including embezzlement and accounting fraud.
South Korean president Roh Moo-hyun pardoned Kim in 2007.