June 15, 2002
General Motors now says it will sell rebadged Daewoo vehicles in the United States. GM, facing a court challenge from Daewoo dealers, had previously said it did not expect to sell the Korean cars in the U.S. market.
GM bought the assets of bankrupt Daewoo Motor Co. earlier this year, giving it control of Daewoo's three factories in Korea and Vietnam. But it did not buy Daewoo Motor America, thus leaving U.S. dealers high and dry and casting doubt on the value of the warranties held by U.S. consumers.
Daewoo owners are having problems getting parts and service on their cars and some have been told that their warranties are no longer valid. GM has said it will honor warranties but has not said how it plans to do so.
The disclosure that GM now plans to sell rebadged Daewoos in the U.S. was made in a written response to a letter from the Florida Department of Highway Safety and Motor Vehicles, which had questioned the company about its intentions.
Twenty-three Daewoo dealers in Florida have filed suit against GM, claiming it has violated dealer franchise laws in Florida and other states by refusing to honor Daewoo Motor America's contracts with dealers. GM has argued that since it bought only the assets of the parent company, it has no obligation to the dealers or, presumably, consumers.
In its response to Florida officials, GM said it was not violating franchise laws which prohibit selling the same products through different sales channels. It said the rebadged Daewoos would not be identical to those previously sold through Daewoo dealers.
GM is also using legal maneuvers to try to move the case out of Florida. It has petitioned a U.S. District Court to hear the case, arguing that since Daewoo's U.S. sales arm has filed for bankruptcy, the federal courts have jurisdiction.
GM warned that a lengthy legal fight would prevent the dealers from honoring customers' warranties, which will be funded by a GM-Daewoo coalition once an agreement is reached. Meanwhile, the dealers "are just strangling to death," said Dan Myers, a Florida lawyer representing the dealers.
