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Daewoo Cars has seen UK sales halved and a 71% profit fall for its

parent company. Will the end of its unique dealership network policy

turn the tide?

Is Daewoo Cars on the skids? The UK retail arm of the ailing South

Korean car-maker last week made sales and marketing director Patrick

Farrell redundant in a restructuring move just as the parent company

prepared to announce a catastrophic 71% slide in year-on-year profits.

Here in the UK, new car registrations are down 50% for the same

period.

It's a far cry from Daewoo's radical UK debut. When Daewoo launched here

in 1995, the brand seemed fresh and full of promise. The company made

waves by establishing its own network of showrooms, selling direct and

cutting out the commission costs traditionally passed on to the

consumer.

An innovative £16m advertising blitz by Duckworth Finn Grubb

Waters introduced it as 'The biggest company you never heard of' and

eschewed car ad cliches to stress service and after-sales care.

Positioned as an affordable, no-frills alternative, the marque captured

1.08% of the UK market within a month of its launch.

But in November last year the Daewoo Group declared bankruptcy amid

revelations of massive internal corruption.

Still haemorrhaging sales, but struggling by on a Korean government

rescue package, the group has made thousands redundant and is now in

talks with General Motors and Fiat about a joint takeover of the

automotive unit.

In a risky bid to stabilise sales down the road, Daewoo Cars has given

up on its unique dealership network model. The company hopes to recruit

upward of 120 franchise retailers to operate in tandem with its own 36

showrooms, 41 service centres in Halford's garages, and two displays in

Sainsbury's stores. It plans to introduce two models next year and will

back them with a rise in adspend.

But having scrapped its key selling point, can it revamp its branding

and stand out enough to ride out the storm? We asked MG Rover Group

marketing director John Sanders and Barrett Cernis managing director

Justin Cernis, who has worked on advertising for Seat, Nissan and

Saab.

VITAL SIGNS

2001 2000

Manufaturer Sales Share Sales Share Change

Daewoo 11,052 0.77% 22,134 1.61% -50.7%

Hyundai 15,731 1.09% 16,549 1.21% -4.94%

Mitsubishi 10,701 0.74% 10,152 0.74% 5.43%

Daihatsu 2763 0.19% 2347 0.17& 17.72%

Source: Society of Motor Manufacturers and Traders; Year to July

DIAGNOSIS

John Sanders

Market share halved. Company in financial straits. Senior management

leaving. This all sounds horribly familiar to me. So, can Daewoo pull

off an MG Rover 'phoenix-like' recovery?

Until last year Daewoo's way of selling cars was billed as a huge

marketing success. In truth, there was little alternative, given the

initial products (vaguely reskinned old generation Vauxhalls), but to

have manufacturer-owned dealerships and offer free warranties and

servicing. The smart move was the concept of friendly service and no

bargaining. Naff cars, but nice people - that'll be the Daewoo.

As Skoda has proved there's no substitute for improving your reputation

(and thereafter your sales) by improving the product. Daewoo needs

someone who can give it financial stability and good products. Strong

advertising has given the brand a clear position as the motoring

consumers' friend, a territory no one else occupies with the same

strength.

So there is still a place for Daewoo. But it must act quickly or it will

have difficulty recruiting dealers, not to mention attract customers.

Which would make its 'Daewho' original launch campaign rather

ironic.

Justin Cernis

Daewoo gave people a new way to buy a car, and to secure market share it

overloaded on the value for money and customer-care offer.

Back in 1995 it seemed revolutionary, but the market has moved on. There

are even more ways to buy. Industry technology gives us enhanced

quality, comfort, efficiency, and options and ranges are broadening.

After-care and warranties are commoditising. It has never been easier to

finance a new car.

The car market is having its best ever year since 1989. How sad then,

that parent company troubles have put the brakes on the momentum the UK

business has built up.

For me, the brand is more famous for its advertising than the product

itself. The cars are too much like competitor models, but without the

clever bits.

I fear Daewoo is in danger of occupying the territory Datsun (now

Nissan) owned in the late 70s and early 80s - competent, uninspiring,

budget, no frills, one generation behind the best.

Fine, if that's what it wants to be, but I feel it has the opportunity

to be more ambitious.

TREATMENT

Sanders' suggestions

- No hassle, no haggle is still a motivating message. Contractually bind

franchise holders to this.

- Stay true to the target audience. Daewoo will never be cool, but the

grey market may be the best bet.

- Stop knocking the competition. It's more effective to express the

brand in a positive way.

- Push for the best possible products.

Cernis' advice

- Innovation/breaking the rules appears to be a positive brand

value.

- Maximise the potential of this in product development.

- Get the deal done with GM/Fiat. Much can be learned from VW/

Skoda and Ford/Aston Martin.

- Because people buy with one eye on depreciation attach greater brand

value to the marque to sustain second-hand values.