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Daewoo running out of gas in USA

Even without factory support, Marc Treiber is still selling Daewoos in Monroe, New York. Treiber at his showroom in August. PHOTO: NY TIMES

John Clark thought he was getting a great deal in May when he bought a fully equipped Daewoo Leganza, with CD player, leather seats and just 27,000km on the odometer, for his wife, Lori.

He paid a Mazda dealer US$9,700 for the 2001 Leganza, which had once carried a sticker price of around US$18,000. Since Daewoo promised warranty protection for three years or 58,000km, Clark, of Orlando, Florida, said he wasn't worried about the possibility that General Motors might buy much of Daewoo, the failing South Korean automaker. "The salesman said GM was going to honor the warranty," said John Clark, 47, who sells outdoor advertising. "I just said, `That's great."'

Two days after the Clarks bought the midsize sedan, Lori Clark had a fender bender. They took the car to a body shop, where they recall the shop owner's saying: "Oh, my God, you bought a Daewoo. You can't get parts for this thing."

It took a month to find used parts within the US, because Daewoo Motor had declared bankruptcy and wasn't shipping cars or parts from South Korea. And it turned out that GM's deal to buy some of Daewoo's operations in Korea and elsewhere in Asia did not include the company's American dealer network. So like 160,000 other Americans who bought Daewoos and those who will end up with the 15,000 deeply discounted cars at American dealerships -- some being sold for half the sticker price -- the Clarks are wondering if they will be able to keep their Leganza on the road. "It's just a disposable car for me at the moment," John Clark said. "It's a throwaway."

No deal yet

Final approval of GM's deal to buy Daewoo plants and put them into a new corporate entity, expected last month, has still not come. If and when it does, GM says it hopes that what's left of the old Daewoo Motor will set up a trust fund to honor the warranties, as stipulated in a master agreement that it negotiated.

But GM says it will take no responsibility for Daewoos already on American roads. "Daewoo owners have no relationship with General Motors," said Toni Simonetti, a company spokeswoman in New York. "General Motors is not assuming any Daewoo Motor of America assets or responsibilities, nor is the new entity we're investing in."

Shutdowns last week of Daewoo's South Korean plants, because suppliers stopped shipping parts until they receive money they are owed, could also threaten the GM deal and cause further delays in parts shipments.

With Daewoo Motor America also in bankruptcy proceedings, some of the 489 dealers in the US are suing GM, Daewoo Motor and Daewoo's creditors. "To say that I feel betrayed is the understatement of the year," said Marc Treiber, owner of Rallyye Chrysler-Dodge-Jeep-Daewoo in Monroe, New York. He figures that he has spent more than US$1 million over two years to advertise and promote the brand. He has sold 700 of the cars, making him the largest Daewoo dealer in the Northeast.

Treiber said GM led dealers to believe that it would support the Daewoo brand in the US, just as Fiat and Peugeot supported their products long after they stopped selling new cars here.

The dealers, in a case filed in Florida, assert that GM conspired to "gut the American Daewoo dealer network."

That, according to Myers & Fuller, the Tallahassee law firm pressing the case, violates the rights of dealers and individuals to have continued distribution of products. Many states, including Florida, Texas and Pennsylvania, have laws against changing product distribution in ways that hurt dealers.

Federal court

GM won a ruling to move the case to federal bankruptcy court in California, but Daniel E. Myers, a partner in the Tallahassee law firm, said he did not think that would slow down the judicial process. In addition, his firm filed a separate class-action suit against GM in mid-August, in US District Court in Orlando.

Complicating the issue is what GM will do with cars from Daewoo factories it is acquiring. With GM's backing, the new entity will continue to sell Daewoo-brand cars in Korea and elsewhere in Asia. And it plans to sell Daewoos in Latin America -- probably relabeled as Chevrolets, a name that is well established there.

Simonetti said GM had a team examining which Daewoo models might come to the US. It is clear that those cars will carry the badges of existing GM brands, a strategy that upsets owners and dealers, because GM might sell cars here as Pontiacs or Chevys that are known in other countries as Daewoos -- avoiding what the dealers see as GM's responsibility to them and their customers.

In the headquarters of Daewoo Motor America in Compton, Calif., a skeleton staff waits to see what will happen. Before the plant shutdowns last week, Ben Rainwater, vice president for parts and service, said some parts had begun to arrive. "I don't think the Daewoo customer is going to be abandoned," he said. But some customers and dealers are afraid that is precisely what will happen.
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