Daewoo Plans Cost Cuts To Counter Input Price Hike

The Korean chaebol is expected to see a significant squeeze in margins primarily due to a rise in steel prices, depreciation of the rupee and additional costs incurred for new features in some models.

DMIL chairman S G Awasthi, however, said the company was planning no further price hikes. "I am confident that the company can sell cars at the current prices, and still make profits," he said.

"We have launched a massive cost-cutting exercise across the board and have already succeeded in cutting the costs by 12 per cent. We will be able to reduce it further to around 15 per cent this fiscal. I also feel that we will continue to make cars at these prices," he added.

Awasthi also said that the company will be able to break-even this year. Daewoo hopes to produce 80,000 cars this fiscal and expects a turnover of Rs 2,500 crore.

DMIL had announced the launch of two new variants of Matiz at prices below that of its competitors. The models are introduced with additional fittings -- power steering and anti-theft system -- that are likely to increase the cost up to Rs 40,000 per unit.

"The new features are based on our customers' perception of value. We have also removed features like power windows since customers do not feel the necessity. This has lowered costs," Awasthi said.

DMIL is currently concentrating on expanding its dealer network across the country to over 300 by the end of the year. In Mumbai alone, the company has added two new dealerships in last one week and plans to launch three more in the next ten days, he said.

DMIL chairman S G Awasthi has said that the partnership between Daewoo Motors and Ford Motors will only make India stronger in the auto sector.

He said that talks between the two companies are in their final stages. The due diligence process has been completed and a formal announcement will be made in September, he said.

Stressing that the country is very much a part of the global deal between the two auto majors, Awasthi said the deal will be the most important partnership in the corporate history of India. It will give direction to the auto market in the country, he said.

Awasthi added the board of Daewoo Motors in India will be restructured following the global arrangement, but declined to get into a discussion on his future in the company.