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Tuesday, 8 January, 2002, 21:28 GMT
Daewoo cuts jobs to ease merger
Daewoo display at NAIAS in Detroit
GM hopes to market Daewoo products around the world
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David Schepp
BBC News Online's North America Business Reporter

Distressed Korean auto maker Daewoo Motor has said it plans to cut nearly 400 jobs from its sales unit in order to ease a mooted takeover by US auto giant General Motors.

Tuesday's announcement follows 500 job cuts in November at Daewoo's marketing division, which is not included in GM's planned acquisition.

I think there's probably quite a lot we can do to help there and reduce the marketing and distribution costs

Nick Reilly, Daewoo acquisition manager

The latest round of cuts mean that over a quarter of Daewoo's sales and marketing staff will have been axed by February.

Daewoo is weighed down by a mountain of debt that some analysts view as a potential obstacle to the GM deal.

There are growing concerns that the company's $17bn debt may turn out to be even larger, with Korean newspaper reports suggesting that its liabilities may have been understated by as much as $1.5bn.

Re-establishing Korea

Speaking to BBC News at the North American International Auto Show in Detroit, Nick Reilly, who is heading GM's effort to absorb Daewoo, said that Daewoo must return to profitability within two to three years.

Daewoo at NAIAS in Detroit
Korean small cars are a hit with young US drivers

He outlined a range of steps the car maker could take to reassure the Korean car-buying public that Daewoo is once again stable.

"Obviously with the doubt over the company that there's been in the last 12 months, it's lost some market share in the Korean market," Mr Reilly told BBC News.

"It has to be a big player there," he said.

Daewoo used to hold 20% of the car market in Korea, according to Mr Reilly. Amid debt woes and customer wariness that share has slipped to just 12%.

Other issues

Analysts say it is imperative to hasten the merger process, which has dragged on since September, in order to revive Daewoo's flagging image.

GM officials have indicated the takeover is still on course, and should be completed in about six weeks.

Cost-cutting is another of GM's option for restoring the ailing Korean carmaker to profitability

GM hopes to leverage its vast buying power to drive down prices on parts as well as merging Daewoo's international operations.

Mr Reilly said it appears Daewoo ran each national division separately, leading to inefficiency and duplication.

"I think there's probably quite a lot we can do to help there and reduce the marketing and distribution costs," he said.

GM hopes to utilise its huge marketing resources to help Daewoo expand in markets around the world, including the US, the UK and Latin America.

See also:

24 Sep 01 | Business
Daewoo deal 'favours' GM
21 Sep 01 | Business
GM signs Daewoo deal
18 Sep 01 | Business
GM 'optimistic' on Daewoo deal
31 Aug 01 | Business
Daewoo Motor sale deadline passes
14 Aug 01 | Business
Daewoo Motor sales collapse
10 Jun 01 | Business
Daewoo's fortunes rise
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