Court Says GMDAT Free to Sell Cars in Disputed Territory

GM Daewoo Auto & Technology Co. wins a court battle over the right to enter into retail agreements with dealers formerly under contract with Daewoo Motor Sales Corp.

DMSC, GMDAT’s former principal distributor, filed the suit in April, a month after its contract with GMDAT had been terminated. In ending its deal with DMSC, the auto maker cited nonpayment for some of the vehicles sold and other contract infractions.

The 21st District Court of Incheon dismissed the suit this week.

“The outcome is as we expected,” Jay Cooney, GMDAT vice president-corporate affairs, tells Ward’s of the court’s decision. “It’s a very good result for us.”

In addition to trying to block GMDAT from recruiting certain dealers, the suit had asked the court to force the auto maker to continue supplying DMSC with cars.

DMSC was the sales arm of the defunct Daewoo Motors Corp., most of the principal Korean assets of which were acquired by the former General Motors Corp. in 2002 to form GMDAT.

DMSC was not acquired and worked under contract with GMDAT until March.

In 2002, DMSC representatives, angry their operation hadn’t been included in the purchase, stormed a GM news conference announcing the acquisition, broke a television reporter’s camera and sent the GM executives scurrying through an emergency exit.

Nonetheless, GMDAT contracted with DMSC to handle domestic sales as an unaffiliated agency.

In an aggressive drive to increase its penetration within the Korean market, GMDAT last year contracted with three other distribution companies to handle vital areas. The three companies are Daehan Motors, Aju Motors and Samhwa Motors.

The multiple retail system went into effect in January, with the four distributors each handling an exclusive sector of Korea.

Since terminating its contract with DMSC, GMDAT has sold vehicles directly to the dealers in the region formerly covered by DMSC.

DMSC’s financial position reportedly has deteriorated further since losing the GMDAT contract. The company is said to be engaged in developing an out of court turnaround plan with its major creditors.