What in your view were the reasons for divorce between GM and Daewoo?

In 1984, General Motors (GM) and Daewoo formed a 50/50 joint venture (JV) called the Daewoo Motor Company. GM and Daewoo each contributed $100 million in equity. The JV would produce the Pontiac LeMans, which was based on GM’s popular Opel Kadett model developed by GM’s wholly owned German Subsidiary Opel. Commentators hailed the alliance as a brilliant outcome of a corporate marriage of German technology and Korean labor (whose cost was low at that time). As a win-win combination, GM would tackle the small car market in North America and eventually expand into Asia, while Daewoo would gain access to superior technology.
Unfortunately, the alliance was problematic. By the late 1980s, Korean workers at the JB launched a series of bitter strikes to demand better pay. Ultimately, the JV had to more than double their wages, wiping out the low cost advantage and the poor quality of the LeMans. Electrical systems and brakes often failed. Daewoo, however, argued that the poor sales were primarily due not to the quality problems but to GM’s poor marketing efforts that had not treated the LeMans as one of GM’s own models. Further, Daewoo was deeply frustrated by GM’s determination to block efforts to export the LeMans to Eastern Europe, which Daewoo saw as its ideal market. GM’s reasoning was that Eastern Europe was Opel’s territory.

GM’s Expectation * Increase in imports (80,000 to 1,00,000 cars a year)

Actual Outcome * Democracy in South Korea led to demand for high wages * Cheaper to build Opels in Germany * Gained reputation of Poor quality * Decreased in sales by 86%

Daewoo’s Expectation * Expansion in Eastern Europe and US

Actual Outcome * Domestic sales slumped * GM poor marketing efforts * GM obstructed Daewoo to sell in US and Europe

Gradually, Daewoo secretly developed independent car models, and GM was unaware of these activities, at least initially (SEOUL, 2006). Once Daewoo launched competing car models, the troubles associated with this JV became strikingly evident as media rumored was there. The picture of an ideal couple with a perfect kid (the JV) was replaced by the image of a dysfunctional family in which everybody was pointing fingers at each other.
In 1991 Daewoo asked GM to pour in another $100 million each for Daewoo Motor to double its output bu GM refused as it wanted to focus on quality. In 1992, GM and Daewoo divorced, with Daewoo buying out GM’s equity for $170 million (S&T Daewoo, 2010). When GM exited the problematic JV, it was left without a manufacturing base in Korea. Daewoo on the other hand, embarked on an ambitious plan to built a dozen auto plants in Indonesia, Iran, Poland, the Ukraine, Vietnam, and Uzbekistan. In the process, Daewoo borrowed and astounding $20 billion, which led to its collapse during the 1997 Asian economic crisis (SEOUL, 1999).
In an interesting turn of events, GM and Daewoo joined up again. Despite its bankruptcy, Daewoo tried to avoid GM and preferred a takeover by Ford. But ford took a pass. Then GM entered the negotiations, and a new JV with Daewoo’s Korean creditors, called GM Daewoo Auto and Technology Company, was eventually formed in 2001. The terms of this venture were quite different from the previous one. Instead of a 50/50 split, GM was now in the driver’s seat, commanding a 67% stake (with a bargain-basement price of $400 million) – in essence, a GM acquisition in disguise (Schuman, 2008).