The program is being discontinued effective Oct. 1 and will include 2000 model-year vehicles already on dealer lots. Instead, Daewoo will include a one-year free maintenance program for all new-car purchases.
The maintenance allowance was a tool that differentiated Daewoo from other budget automakers, including rivals Hyundai Motor America and Kia Motors America, which offer 10-year power train warranties. However, Daewoo executives said that while the program was an effective deal-closing tool, it did not drive much traffic to dealerships.
"The dealers pleaded with us not to cancel the program, but we needed to spend more advertising dollars. And we need to have rebates like Hyundai and Kia. It all depends on how you want to spend your money," said Gary Connelly, Daewoo senior VP.
Cutting the program will add about $750 per car to advertising and dealer incentive budgets. Daewoo's ad budget for September and October is $11 million.
Mr. Connelly said Daewoo's increased advertising budget has allowed it to hit national ad schedules, including the Tiger Woods-Sergio Garcia golf match, the Summer Olympics and Major League Baseball's upcoming World Series.
"We don't have any brand. Nobody knows what our cars look like. We need to get the cars in the ads," Mr. Connelly said.
Daewoo started airing two new spots on NBC during the Olympics, which will continue after the Games on broadcast and cable networks, said J.C. Lee, general manager of national advertising. BNC, Los Angeles, which he described as a small creative boutique, handled separate executions for the Nubira and Leganza sedans, but much of the work is handled in-house.
AGENCY SHUTS DOORS
Early this year, the marketer tapped Kenneth C. Smith Advertising, La Jolla, Calif., to develop its first national TV spot and buy media, noting work would be doled out on a project basis. That agency has since closed its doors.
Daewoo's Mr. Connelly compared ending the program to the completion of any other incentive program. "The dealers all knew this was coming," he said.
In fact, Daewoo took the first step in dismantling the program in April when it replaced three years of free service and maintenance with an allowance of up to $1,000 that was to cover all maintenance costs. But normal wear-and-tear items that were in the original plan were not included in the revised version.
That plan was supposed to end in July, but dealers asked for an extension.
A recent J.D. Power & Associates customer satisfaction survey said Daewoo's surprising fourth-place finish was attributable largely to its free maintenance plan.
But Mike Mahoney, Daewoo general manager of field operations, said many other customer-care factors contributed to the high score. "Volkswagen had a free maintenance program and they didn't finish fourth," Mr. Mahoney said.
Even when Daewoo plugged the maintenance program in its advertising, it still wasn't cited as a reason for why customers came to dealerships, he said.
DON'T TOUCH THAT STICKER
What is enraging some dealers is the way Daewoo is dismantling the plan. Rather than end it with the beginning of the 2001 model year, Daewoo is pulling the plan from any vehicle sold after Oct. 1, including vehicles already delivered to dealers. Daewoo regional staffers will visit dealers and put new price stickers on the 2000 models still in dealer vehicle inventories.
"Suddenly, 100 cars on my lot no longer have this program? I told them they don't touch my [sticker prices] until they come with a court order," said Marc Treiber, owner of Rallye Auto Plaza in Monroe, N.Y.
Mr. Connelly said Daewoo had the move approved by the U.S. Department of Justice.
Mr. Rechtin is a reporter at Automotive News; Jean Halliday contributed to this story.
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