There was a time when Daewoo was the leading brand in the world in many fields
There was a time when the name Daewoo was once the pride of Korea, was one of the leading companies of this country, besides Samsung, Hyundai, LG … Mentioning this name was referring to a business. a giant contributed greatly in the rise of the country of Kim Chi, a famous car manufacturer in the 80s – 90s of the last century.
Before the Asian financial crisis in 1997, Daewoo was Korea’s second largest chaebol (multidisciplinary corporation) after Hyundai. But the company’s leadership team ‘s unforgivable mistakes almost made the Daewoo brand disappear on the world map. However, to this day, people still know Daewoo through their remaining subsidiaries, reminiscent of the heroic memories of this business in the past.
Daewoo Group was founded by President Kim Woo-jung – son of governor of Daegu province, Korea. President Kim is an incredibly talented man as he graduated from the prestigious Kyunggi High School, then earned a degree in Economics at Yonsei University in Seoul. With both financial and business-oriented help from his father – who was an advisor to President Park Chung hee (who later completely changed the face of Korea), Kim Woo-jung founded so Daewoo – translated into Vietnamese means “Great Universe” in 1967.
Under President Park Chung Hee, large private enterprises were used instead of state-owned firms, which were later known as chaebol. The chaebol enjoy a lot of incentives to be able to develop: being protected by the state monopoly in the country, borrowing money at very low interest rates and receiving funding from the government. In return, these companies must achieve certain achievements, while also supporting the government of Park Chung hee. Firms seen as the beginning of the chaebol dynasty are Samsung – an agro-products company, Hyundai – a US auto repair and builder, and Daewoo, which focuses on textile industry.
At that time, the textile and garment industry in Korea brought a high profit margin thanks to cheap and abundant labor. As a result, Daewoo – then just a small business – was chosen by the government as one of the key companies thanks to its huge export potential for clothing products. Thanks to his father’s relationship with the president, President Kim acquired a type of textile business in South Korea, creating Daewoo Corporation.
After the initial development period with the textile industry, Daewoo gradually developed through other businesses. During the period from 1973-1981, the group built a reputation through shipbuilding as well as its oil rigs, thanks to its relatively competitive price. After that, Daewoo expanded its influence globally by associating with a number of American and European businesses.
Daewoo began to manufacture machinery and defense products, along with the manufacture of helicopters and civilian aircraft. The company’s machines and aircraft are of good quality and competitively priced with similar products from the US, thus giving a huge advantage in expanding the influence of the Daewoo brand in the world. . Not only that, Daewoo also expanded into the automobile manufacturing industry and achieved great success. This corporation is the seventh largest car manufacturer and the sixth largest car manufacturer in the world in the 80s – 90s of the last century.
Daewoo Racer 1993 – one of the famous cars of Daewoo (Image: Hamari Autos)
Despite such success, mistakes in financial management have left this group bogged down. In 1997, the Asian financial crisis that started in Thailand took place and spread to the entire region; South Korea is also one of the worst affected countries, with its debt / GDP ratio doubling (from 13% to 30%).
This forced the government to cut incentives for low-cost chaebol loans, as the banking sector was burdened by large conglomerates’ bad debts due to aggressive expansion. globally. The chaebol, instead of seeking profits, were trying to expand as much as possible thanks to cheap capital from political relationships, which caused these huge debts and brought the country of Korea. at dark times.
In 1998, when the country was in a serious crisis, most chaebols had to cut back when the four biggest firms of the time (Samsung, LG, Hyundai and Daewoo) had five times their total liabilities. owned.
Daewoo did the opposite by increasing the number of its subsidiaries by 14, while increasing the amount of debt by up to 40%. In a year in which the group lost 550 billion won ($ 458 million), expanding and continuing to borrow was an unforgivable mistake. A year later, the second largest corporation in Korea officially went bankrupt with a debt of about 50 billion USD (equivalent to 77 billion USD at exchange rate in 2019). At this time, Daewoo is still present in 100 countries around the world.
The economic crisis in Asia was one of the factors that caused Daewoo’s bankruptcy in 1999 (Photo: Korea Times)
Immediately after Daewoo’s bankruptcy, President Kim fled Korea and only returned in June 2005. The president was accused of masterminding accounting frauds 41 trillion won ($ 43.4 billion), illegally borrowing 9.8 trillion won ($ 10.3 billion), and bringing out $ 3.2 billion. foreign. At the end of June of that year, Kim Woo-jung was found guilty of embezzlement and fraud and was sentenced to 10 years in prison.
At the end of 2019, the president of Daewoo died at the age of 83; he successfully built Daewoo into a leading empire in Korea but at the same time collapsed the achievement of his life.
Today, the Daewoo brand is known to 3 companies: Daewoo Corporation, Daewoo Engineering & Construction and Daewoo International Corporation, operating in the real estate sector, manufacturing and processing steel products, shipbuilding and translation. financial services. Daewoo’s famous automobile brand was replaced by Chevrolet in Korea one day, and its commercial vehicle company was acquired by Tata Motor of India.
Meanwhile, Engineering & Construction (Daewoo E&C) is still one of the strongest construction companies in the world, present in 47 countries with more than 300 projects worldwide. In Vietnam, Daewoo E&C has invested in building Daewoo Hotel, one of the top 5-star hotels in Hanoi and a number of other projects. This business is also one of the main investors of the Starlake project in Tay Ho Tay area through T.H.T Development Co., Ltd. with a total investment of 1.3 billion USD.
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Daewoo 5-star hotel in Hanoi, one of the famous works of Daewoo E&C. (Photo: Booking)
Once one of the iconic companies in Korea, however, expansion and uncontrolled debt and financial fraud from the chairman made Daewoo bankrupt. Chaebol number two is a thing of the past; Today, what remains of Daewoo are the subsidiaries that are still active to this day. However, it cannot be denied the influence and contributions of this corporation to the Korean country in the reconstruction and economic development; They deserve to be recognized as one of the corporations that brought Kim Chi country where it is today.