Gov't team to save Daewoo

"Tata's interest is at a very initial stage, but every type of talks with any potential investor brings us closer to our goal." The Economy Ministry assembled a rescue team last week to save two Daewoo plants and confirmed that India-based carmaker Tata Engineering (TE) was interested in taking over Warsaw's cash-strapped Daewoo-FSO car factory. The announcements came in response to mounting pressure from domestic carmakers and dealers who demanded the government come up with a solution for the beleaguered industry. But the formation of a rescue team led by Deputy Economy Minister Maciej Lesny has yet to be approved by Prime Minister Leszek Miller. Meanwhile, TE's involvement in Daewoo-FSO remains tentative. "Tata's interest is at a very initial stage, but every type of talks with any potential investor brings us closer to our goal," Paweł Badzio, spokesman for the ministry, told the Business Journal. The Economy Ministry would prefer a company whose headquarters are located closer to Poland, he added. Economy Minister Jacek Piechota told a local radio station last week that Daewoo-FSO was in talks with a potential investor (though not TE) for the Warsaw factory. Daewoo's Polish operations have been pushed to the edge of bankruptcy because of parent-company difficulties in Korea and a domestic market that has watched sales tumble nearly 50% in the past three years. Daewoo-FSO employees responded with skeptism to the government's announcements and warned they would stage a walkout if the new administration, which took over last October, doesn't come up with a plan to save the plant by the end of January. "I think Piechota is spreading hyped-up information," said Marek Dyzakowski, leader of the Union of Engineers and Technicians (ZZIT), one of Daewoo-FSO's unions that said it would strike. "The Economy Ministry is trying to send out signals to the public that there are investors interested and that it has some kind of policy." Workers at the Warsaw-based plant are demanding that the administration form a cross-ministerial team to stem the flood of used-car imports, launch serious talks with the plant's creditors, and take an active part in the search for a new investor at the two Polish plants owned by the bankrupt Korean automaker Daewoo Motor. Despite their skepticism, the unions said they wanted Miller to back the proposed rescue team. "We want the prime minister to approve the team," Dyzakowski said. Jerzy Wozniak, leader of Solidarity, the biggest union at Daewoo-FSO, said that all of the plant's unions had announced a strike alert. He called on the government to upgrade regulations protecting the Polish market from old-car imports to European Union (EU) standards and to actively join the search for a new investor for the automaker. "It's only the government that can be a partner in talks with a potential investor, not the management of Daewoo-FSO, not even Daewoo Motors in Korea," Wozniak said. Daewoo Motors, the majority owner of the Warsaw plant and the sole owner of van maker Daewoo Motor Polska in Lublin, was declared bankrupt in 2000. The government holds a 9% stake in the Warsaw-based factory. Apart from problems the two plants have had because of their Korean parent's bankruptcy, their sales have been hit by a recession on the Polish car market and increased imports of used cars from Western Europe. The flood of used Western cars has increased even more since Jan. 1, when Poland lifted a ban on the import of cars more than 10 years old. "This government has been continually promising us that it will solve this issue through legal regulations, but we still haven't seen it happen," Dyzakowski said. Wozniak threatened far-reaching action, including picketing and demonstrations, if the government doesn't heed union warnings. "We will wait no longer than until the end of January," he said.