SEOUL — Four years ago, Daewoo Motor was the biggest and ugliest addition to South Korea's junkyard of bankrupt companies. Its parent conglomerate had collapsed, and most potential investors were intimidated by its militant labor union.
In its home country, the Daewoo brand had become nearly synonymous with failure.
When General Motors bought Daewoo Motor in April 2002 at a bargain price of $1.2 billion, officials announced the deal at a hastily organized news conference in a bank office. Union workers, angered by layoffs at Daewoo, had invaded the upscale hotel in Seoul where the announcement was scheduled.
The successor company, GM Daewoo Auto and Technology, is now a bright spot for GM, which is struggling with declining market share in the United States and a burdensome legacy of benefit obligations.
While GM's domestic operation is shedding assets and workers, and steadily ceding its market dominance to Japanese competitors like Toyota, its South Korean unit is expanding fast, producing popular vehicles for China and underpinning its campaign to globalize the Chevrolet and Buick brands.
"Among GM's recent mergers and acquisitions, GM Daewoo is the most successful," said Kim Jae-woo of Mirae Asset Securities.
GM's ability to thrive in South Korea is surprising, given the country's general hostility to foreign businesses. But GM's decision to rehire all 1,600 workers laid off by the old Daewoo won respect. After all, local rivals like Hyundai Motor and Kia Motorsseem more eager to create jobs overseas than at home.
GM's reputation was further enhanced in October when it bought a Daewoo plant that can produce 400,000 cars a year and was not part of the original acquisition deal. The factory, in Bupyeong, was the site of some of the most aggressive labor protests in South Korean history.
GM refused to include the factory in the newly constituted subsidiary, though it did offer a seven-year supply contract and agreed to revisit the idea of a purchase in 2008 if the plant improved productivity and reduced tensions with workers. Ownership remained with Daewoo's creditor banks.
But with soaring demand for its cars, 90 percent of which are sold overseas, and the Bupyeong plant free of unrest, GM thought that the time was right to upgrade its commitment. The purchase of the plant "happened much earlier than we had expected," said Nick Reilly, the chief executive of GM Daewoo. "Performances improved, and they were producing good-quality cars."
Meanwhile, the corruption scandal that has engulfed Hyundai and Kia, which led to the arrest last month of the chairman of the Hyundai-Kia conglomerate, Chung Mong-koo, has made GM Daewoo's image seem relatively untarnished, though memories linger of a bribery and fraud scandal in the 1990s that involved the Daewoo conglomerate.
GM Daewoo is "the most remarkable case of attracting foreign investment to resuscitate a failed South Korean company," said Ahn Soo-Woong of Woori Investment & Securities.
Ford pulled out of the bidding for Daewoo Motor in 2000. Now, analysts say, Daewoo is providing GM with something Ford desperately needs: the ability to quickly develop and produce small, price-competitive cars. These are in heavy demand not only in the United States but also in China and other emerging markets, which offer the sales growth fundamental to survival.
Last year, GM Daewoo sold 1.16 million cars, more than double the number a year earlier. In the first four months of this year, its sales increased 53 percent, to 476,000 units, surpassing Kia Motors as South Korea's second-largest carmaker, after Hyundai.
Daewoo vehicles, riding on GM's global sales network, are now sold in 150 countries, often under Buick, Pontiac, Suzuki and Chevrolet brands. The Daewoo operation produced 32 percent of all GM cars sold last year in China, GM's second-largest market after the United States. Chevrolet sales in Europe grew 26 percent last year, all based on GM Daewoo products.
Challenges loom. Toyota and Honda are potent global competitors. And GM's success could ultimately bring conflict with Daewoo's still powerful labor unions, which may tire of seeing their workers paid less than those at Hyundai and Kia.
Finally, the rising value of the won is eroding the competitiveness of all South Korean exports. GM Daewoo, more than any other South Korean carmaker, depends on export sales.
"The coming challenges and competitive pressures will be no less than they were," Reilly said. "They will probably intensify rather than slacken."