Daewoo announces plan to suspend production in Zeran
After one of the stormiest weeks for Poland's budding auto sector, Daewoo-FSO last week announced stop-gap plans to try to save its floundering Polish operations.
At a press conference Friday, the company announced that it would halt production in its zeran factory for three weeks starting today, a move company officials described as the first step in restructuring its Polish operations.
The announcement on Friday was a clear attempt on the part of the Korean car producer to calm public fears following a tumultuous week that started with a Reuters report claiming the company planned to lay off more than 2,000 employees in zeran and a further 1,200 in Lublin. Daewoo promptly denied the report.
At Friday's press conference, Janusz Wozniak, vice president of Daewoo-FSO, said that reductions in zeran in the coming three months would be limited to 188 employees, bringing employment down to 5,300 people.
"I've been reading the news about mass layoffs with real surprise," he said. "For two years we've been restructuring our company and we looked at the problem of excess employment ... and now we can't say the problem concerns 3,000-4,000 people."
Wozniak said the company was beginning deep restructuring in an attempt to revitalize its business in Poland. He said the restructuring that the company had begun in zeran would now be accelerated due to the dismal state of the Polish automobile market.
Car sales in Poland have fallen by 19% during the past year, according to Samar, an independent automobile research company.
Analysts said that the rising costs of purchasing and maintaining cars caused the drop in car sales this year. Also to blame were excise tax increases on new car sales up at 6% from last year's 2% as well as rising insurance and loan costs. In addition, fuel prices played a role in declining car sales. Over the past year, the price for a liter of gas has risen by 20%.
Overall, the morose situation for car producers affected Daewoo particularly hard this year. The 89,000 cars it sold in September represents a 32% drop from 1999.
But analysts were quick to point out that Daewoo is not the only one to have suffered from higher than average losses in sales. Fiat, Daewoo's main competitor in Poland, saw a 30% drop on the domestic market during the same period, Drzewiecki said.
As the largest single investor in Poland, Daewoo's ills hit a particulary raw nerve.
Since 1995 the automaker has invested some $1.4 billion in more than 30 production units in Poland, which include Warsaw's Daewoo-FSO Motor, Lublin's Daewoo Motor Polska and Pruszkow-based Daewoo Electronics and Machines, according to the Polish Foreign Investment Agency (PAIZ).
At present, Daewoo employs more than 25,000 people in Poland, according to the Reuters report.
Jerzy Wozniak, chairman of the committee of labor unions at Daewoo-FSO, told reporters that there were big problems with maintaining employment in Daewoo's factories in areas such as Nysa or Andrychow.
"Daewoo is not only in Warsaw," he said. "Daewoo is also in Lublin and Andoria where there's big unemployment. We really want these factories to exist." Already, Lublin-based truck producer Daewoo Motor Polska is sacking 1,200 employees from its current staff of 4,200, the company announced last week.
Drzewiecki also said that uncertainty over the future of Daewoo's parent operations in Korea would have a negative effect on the company's sales in Poland. Clients won't buy the cars of a company whose future is uncertain, because they want to know that they'll be able to buy spare parts or get service, he said. "The more negative light is shed on Daewoo, the bigger the threat to the people working for the company," Drzewiecki said.
