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GM plots franchise future for Daewoo

General Motors intends to establish a new sales operation for Daewoo in the UK, casting doubt over the future of the Rickmansworth head office after completing the £277m ($400m) purchase of the South Korean carmaker.

The company is also planning to accelerate the move away from Daewoo-owned retail outlets to a franchised network in the UK. Eight dealers have been appointed since November, though it is not known whether they will be retained.

GM has an opportunity to try multi-franchised sites with Vauxhall dealers, a number of which have already expressed an interest in the marque. They were reluctant to commit before the deal was finalised, but the long-term stability offered by GM-ownership is likely to appeal - Daewoo models offer a cut-price alternative, with a strong aftersales proposition.

According to a Daewoo spokesman, GM does not plan to close down the UK operation, but he admitted there would be significant restructuring. A taskforce has been sent to the UK to assess the sales structure.

“GM wants to set up a new company in the UK and it is not clear what this means for the present head office,” says the spokesman. “We have a lot of experience which GM can use and I hope any changes will be largely in the background and not visible to dealers or customers.”

The UK operation is Daewoo's only European subsidiary that operates its own retail network. Analysts believe this influenced GM's judgement when deciding which overseas assets to purchase. “GM is a firm believer in the franchised dealer approach to retailing - it does not want to get involved with direct retailing, which put Daewoo's UK operations in a weak position,” says one source.

Daewoo admits that GM made clear its position when talks started around 18 months ago. This prompted the decision to begin appointing a franchised network, which also helped free up resources from selling wholly-owned sites. One Daewoo source says: “We needed cash to continue importing cars from South Korea. After the parent company collapsed, financial support dried up so selling some of our sites certainly helped.”

Uncertainty over the sales operation's future structure might also scupper Daewoo's plans to relaunch SsangYong in the UK. The company had reached agreement to import the Rexton 4x4 from August but this now depends on GM's action.

“We understand that the SsangYong matter was raised during the negotiations so we are hopeful that it will go ahead - but the situation still needs to be clarified,” says the spokesman.

Daewoo spun off the SsangYong business, acquired in 1996, 18 months ago after its collapse forced restructuring, but the UK division continued to import the Musso off-roader. Nick Reilly, GM Europe vice president, will become Daewoo president and chief executive officer, as expected.

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