Why is Doosan giving up dealership?
By Kim Tae-jong
Doosan Group has recently announced it is giving up its Honda dealership.
The conglomerate said it is a move to concentrate on core area, namely its infrastructure support business (ISB), and also a decision affected by public anger towards chaebol’s allegedly ruthless business expansion.
But are they the only reasons behind the surprise announcement?
Currently, DFMS, Doosan’s dealership, has been importing Hondas as well as a small number of Jaguars and Land Rovers. Its deal with the Japanese company dates back to 2004. Doosan agreed deals with Jaguar and Land Rover last year.
“We decided to retreat from our imported car dealership business as we want to focus more on ISB,” said an official from Doosan Group. “We thought car dealerships are not of much help to our group, given our long history as a leader in heavy industry.”
At present, DFMS owns a showroom for Honda models in Cheongdam-dong, southern Seoul, and another showroom in Bundang, Gyeonggi Province for Jaguar and Land Rover.
The group also said it wanted to take social responsibility amid mounting criticism against conglomerates whose business expansions are hurting small- and medium-sized companies.
“The decision is also due to complaints against chaebol, which try to monopolize all the segments in the market,” the official said.
Previously, the group announced it would scrap its plan to run a coffee house chain through its food-focused affiliate SRS Korea, following fierce criticism that it tried to encroach on business territory traditionally occupied by small vendors.
Shilla similarly announced it will abandon its Artisee bakeries while Hyundai Motor affiliate Haevichi Hotel and Resort said it will withdraw from bakery business Ozen.
Industry sources believe that Doosan Group’s decision will have a reformative impact on the imported car market, which has long been dominated by chaebol family members.
DFMS is owned by the great-grandsons of the group’s founder Park Doo-Byung, while three sons of Hyosung Group chairman Cho Suck-rai control a 10.44-percent stake in the Class Hyosung with a dealership for Mercedez-Benz. Charmzone Group chairman’s two sons run dealerships for Audi and Bentley. Central Motors, established by relatives of GS Group Chairman Huh Chang-soo, sells Lexus models.
But market insiders are skeptical of this “naive” anticipation.
They emphasize that imported car dealerships run by conglomerates are different from bakery or coffee house chains that can be a serious threat to small- and medium-sized companies and small traders.
“You should not criticize conglomerates for their imported car dealerships, arguing they are making easy money through business expansion at the expense of small- and medium-sized companies,” said Yoon Dae-sung, executive managing director the Korea Automobile Importers & Distributors Association. “Dealership businesses require at least billions of won. How could small vendors do such business?”
Another market insider also argues that the main reason behind the group’s sudden decision to scrap its dealerships is actually a decline in sales and increased deficits.
“We think the retreat by Doosan Group is mainly attributed to a drop in its sales,” an imported car dealer said, who declined to be identified. “Rather it shows the decline in the popularity of Japanese automakers here over those from Germany.”
According to recent data, DFMS posted a total of 34.5 billion won in sales yet with a 200 million won sales deficit last year, which contrasts with the booming imported car industry, which is expected to grow about 12 percent on-year in 2012, fueled by steady consumer demand for foreign vehicles.