Auto makers mull over GM/Fiat Daewoo bid
By : Jeffrey Sparshott
General Motors and its partner Fiat last week made a bid for South Korea's ailing automotive manufacturer Daewoo, although a takeover's impact on the Polish market is uncertain.
A Polish holding company will purchase Daewoo's commercial vehicle operations, based in Lublin, but the future of passenger vehicle operations, based in Warsaw, are unclear, said company officials and industry analysts last week.
"Nobody knows what's happening," said Wojciech Drzewiecki, owner of Samar, an automotive marketing firm. "GM has a factory in Gliwice. Fiat has its own factory. Both are producing cars and both have problems. It seems their interest in (another) Polish factory can be very small."
Together GM, Fiat and Daewoo account for about half of the auto market in Poland, according to Samar.
Daewoo owns Daewoo FSO-Motor, based in Warsaw, and Daewoo Motor Polska (DMP), based in Lublin, but with operations in Warsaw. DMP's Lublin plant might be interesting to GM because it produces commercial vehicles, Drzewiecki said, but that firm is in separate negotiations to sell Pol-Mot Holdings a 75% stake.
Beata Stopyra, DMP's spokeswoman, last week said a deal with Pol-Mot should be complete in a matter of days. Warsaw-based Pol-Mot would take over 75% of the commercial vehicle manufacturer's shares and increase share capital by $20 million. GM's bid will have no bearing on the deal, she added.
DMP, along with most auto manufacturers in the country, have been suffering this year because of slowing sales. "Our financial situation is not good but we are hoping for better days," Stopyra said. According to the Central Statistical Office (GUS), motor vehicle production was down by 20% in the first quarter of 2001, compared with the same period in 2000. Passenger cars were down by more than 25%, buses by 9%, trucks and tractor-trailers by 56%.
Daewoo FSO-Motor officials would not comment on negotiations with GM beyond a press release issued last week announcing formal negotiations. Analysts said GM's main interest in the South Korean company lies with the Asian market, not in Poland. "It's difficult to say how (purchasing Daewoo) would affect GM's European strategy," said Michael Dean, an auto analyst with Merrill Lynch in London. "For them, it's mainly an inroad into Asia. Fiat's situation is more applicable."
Fiat has a strong market position in Poland and Daewoo is a major competitor, he said. But while the Italy-based company has an option to join the purchase deal, it has decided to wait and see how negotiations proceed before making a public commitment.
Another consideration is how regulators would view any sale. There is limited room for further consolidation in Europe, and the European Union might not allow a deal that limits competition, Dean said. Poland's Office for Competition and Consumer Protection (UOKiK) governs such matters here. In Poland, Fiat has almost 27% of the market, Daewoo has more than 16% and GM 7.5%, according to Samar.
However, officials from GM, Daewoo and the Korean Development Bank, which is Daewoo's main creditor and directly involved in negotiations, have refused to comment on which assets are being talked about. "It is unclear at this point exactly which foreign assets GM may take," Daewoo Motor spokesman Kim Jong-do told Reuters in Seoul.
GM could reach a preliminary agreement to buy Daewoo Motors in one to two weeks, the bank said Thursday.
Regardless of negotiations with GM, the Korean company's joint venture in Lublin, signed in 1995, is coming to a close. Daewoo Motor Polska has lately been rocked by a slowing auto market and forced to lay off 900 workers this year. Nearly 3,000 Poles still work for the company, though, and the government extended a $100 million credit to help ensure the company's survival, Stopyra said.
The company will begin production of a new vehicle within nine to 10 months and factories should be tooled to produce more than 40,000 vehicles per year within three years, she said. The name of the new vehicle has not been set, nor has the name of the company once Pol-Mot's acquisition is complete, although exports might still go out under the Daewoo name.
