GM Korea welcomes competition

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Chevy Care is an epitome of US automaker’s differentiation strategy

By Kim Da-ye

If Scottish philosopher Adam Smith were alive today, GM Korea CEO Mike Arcamone would be a good protégé of the Wealth of Nations author.

The Korean arm of U.S.-based General Motors achieved in June a 10-percent market share thanks to the introduction of the Chevrolet brand and new vehicle models. The second half is expected to be more challenging as Renault Samsung is preparing a comeback with the all-new SM7 and foreign automakers expand aggressively.

Arcamone, however, remains undaunted and rather welcomes the competition.

“I hope Renault Samsung becomes stronger, giving more products. Ultimately, the winners will be the consumers,” the Canadian CEO said.

“When companies figure out what consumers want in Korea, sales will go up. The competition is great. It gives better products.”

The remark is an echo of Smith’s theory that pursuit of self-interests, or succinctly competition, in the free market keeps prices low and diversifies goods and services, eventually benefiting society.

Arcamone’s strategy to compete in the Korean market that is nearly dominated by Hyundai Motor and Kia Motors is to offer something that the others don’t. Chevy Care is the epitome of such approach.

Chevy Care offers a bumper-to-bumper, five-year/100,000-kilometer warranty on all Chevrolet vehicles including the Spark that is sold at an affordable less than 10 million won. The package also consists of three-year free maintenance services including engine oil changes and seven-year roadside assistance available 24-hours, seven days a week.

“Chevy Care is a benchmark, one of the best. It was launched first in Korea, and other countries including the U.S. are looking at what we have done,” Arcamone said.

Along with the overhaul of the after-sales services, GM Korea began renovating its 506 service centers across the country.

One center in Incheon, Gyeonggi Province, which opened May 27, is a clear indication of what GM Korea aspires to achieve.

Inside the waiting room of the center is painted white with warm, yellow lighting and a glowing Chevrolet logo on the wall. There are personal computers, Apple’s iPads and even a café that offers free drinks for drivers as their vehicles are serviced.

Another strategy is to promote vehicles belonging to segments that aren’t taken by other automakers, Arcamone said.

GM Korea has launched five vehicle models including the Orlando, Aveo, and Camaro and will launch three including the Corvette and Malibu in the second half of the year.

Chevrolet Orlando, a seven-seat multi-purpose vehicle which GM Korea prefers to call an active life vehicle, encompasses that.

“Chevrolet Orlando is in a new segment ― an active life vehicle. This vehicle wasn’t aimed at Renault Samsung, Hyundai, Kia or SsangYong. It was a segment we were confident about,” he said.

The chief said that the Orlando enjoys a 55 percent market share in Korea within the segment. The model sold 2,145 in June ― up 58.2 percent from a month earlier.

If the market test proves successful, GM Korea will also be able to open a new market for plug-in hybrids, vehicles that run on rechargeable batteries and gasoline.

The company is preparing to release about 10 Chevrolet Volts into the market and they are currently being tested by the government, the media and consumers. By the end of the year, GM Korea will decide whether or not it will import the model, Arcamone said.

The advocate of competition applied the same principle to suppliers.

GM Korea is working with 17 local auto parts suppliers, and Arcamone said it goes to multiple suppliers for the same part.

A strike at Yoosung Enterprise, a piston ring maker, briefly stopped production at Hyundai Motor and Kia Motors in May because they fully relied on Yoosung. GM Korea has only half of its piston rings supplied by the company so was less affected.

“We are not dependent on one supplier for critical parts. We move around,” Arcamone said.

General Motors keeps a global supply chain for auto parts and monitors costs of raw materials to maintain transparent pricing.

“If Korean suppliers are the most competitive because of quality, price and logistics, they get the contract. It’s that simple. It’s competition,” he said.

And don’t expect Arcamone to accept leniency and unfairness. He comes across as a next-door neighbor with warm smile, but is a cool-headed businessman with unwavering belief in market forces.

Simply, he doesn’t want anything but competition involved in his game.

One industry source said that his approach could be risky as the Korean government wields much influence in the market.

When he was asked if he would take legal action or use politics to break the monopoly in the auto industry, he firmly answered, “No.”

He divided things into what he and the company can control and what they cannot.

“We can control products, investment, understanding of consumer expectation and behavior. But we have no control over legislation and politics. They are not the ways to success,” Arcamone said.

“No matter what legislation exists, consumers have appetite… I don’t worry about legislation over which I don’t have control.”

The voice of the automobile CEO exudes optimism and the responsibility to realize that optimism.

GM Korea, formerly GM Daewoo Auto & Technology, had its market share peak at 10.7 percent in 2006 but drop to 8.1 percent last year. It rose to 10 percent in June, and it’s Arcamone’s job to improve the figure although he wouldn’t mention a specific target.

“In 2010 at the Busan auto show, we told the media that we had a strategy. We said we are going to make decisions on the brand strategy and on the portfolio,” he said.

“We launched eight products in a year. Six of them are produced locally. Never in the history of General Motors, let alone GM Korea. We are here to stay. We are here to offer products, design and engineering.”