ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Thursday, August 8, 1996 TAG: 9608080047
SECTION: BUSINESS PAGE: B-6 EDITION: METRO
DATELINE: TRAVERSE CITY, MICH.
A South Korean manufacturer, with ambitious plans to sell cars around the world, said Wednesday it plans to enter the U.S. market by opening 200 to 500 company-owned sales outlets in the next several years near college campuses.
The plans by the Daewoo Group, South Korea's fourth-largest conglomerate, represent a break with auto marketing and distribution practices in the United States. U.S. and foreign manufacturers currently supply the North American market by selling their cars and trucks to independent dealers.
While the major automakers have discount programs for college students, Daewoo said that it planned to focus almost exclusively on college students, professors and their families, clearly a novel approach. The industry's pattern has been to distribute cars and trucks by geographic areas, rather than by the occupation of the buyers. |- The New York Times
Daewoo intends to lure young people with affordable cars and then sell them more elaborate vehicles as they grow older.
South Korea's Kia, for example, is in the process of trying to elbow its way into the U.S. market by first selling its small, inexpensive cars in the East and West Coast markets.
Daewoo chairman Kim Woo-choong said the company plans to enter the U.S. market in late 1997 or early 1998 and sell 100,000 cars a year by 2000. That is about two-thirds of 1 percent of the nation's car and light truck market, or about the same as Subaru or Volkswagen or BMW.
While cautioning that the company might yet change its plans, Kim said that
Kim spoke to several reporters here after delivering a speech at an auto industry conference organized by the University of Michigan.
Daewoo's cars will be similar in size to Chrysler Corp.'s $11,000 Plymouth Neon, said Kyung Hoon-lee, the chairman of Daewoo's U.S. operations. The company plans three models for the United States, with 1.6- to 2.2-liter engines, and plans to unveil one or more of these models in Korea in November, said Kim, who declined to predict the prices of the Daewoo cars.
Cars are commonly sold through company-owned sales outlets in Asia, including South Korea, and Daewoo has already begun selling cars through company-owned sales outlets in Britain. The strategy has attracted considerable curiosity from Detroit's Big Three automakers.
Kim said that Daewoo had found that owning its outlets helped the company hold down distribution costs, which account for as much as a fifth of the cost of a car sold through a dealership. The outlets also keep customers happier, he said.
Daewoo is also studying ways to sell cars directly to customers in Korea and the United States using the Internet, Kim said. Detroit's Big Three automakers have also been studying this option but have been reluctant to pursue it for fear of angering dealers who would resent being bypassed.
John P. Peterson, the president of the National Automobile Dealers Association, said he was not aware of any other automakers selling cars or light trucks through company-owned sales outlets in the United States. He declined to respond to Kim's comments Wednesday, saying that he would wait for a formal announcement by Daewoo.
Many states have laws barring auto companies from selling cars directly to the public in competition with their franchised dealers. Often the result of intense lobbying for car dealers, these laws are designed to prevent automakers from putting their dealers out of business by favoring their own sales outlets with popular vehicles in short supply.
But it is not clear whether these laws would apply to an automaker with no franchised dealers, said James A. Moors, an attorney at the trade group who specializes in auto franchise agreements.
In Virginia, for example, Daewoo would probably face a hearing before state regulators before opening company-owned sales outlets, but state law does not explicitly prohibit company-owned sales outlets for automakers without franchisees, he said.
Porsche tried in the 1980s to open company-owned sales outlets, but withdrew in the face of lawsuits from its franchised dealers.
- The New York Times
LENGTH: Medium: 78 linesby CNB