PSA-Toyota not interested in Daewoo-FSO facility

“A takeover of Daewoo-FSO would be too risky”.
By : Robert Wylot

   PSA Peugeot-Citroen and Toyota will not take over the troubled Daewoo-FSO car plant in Warsaw if it goes ahead with plans for a joint car-manufacturing facility in Poland, a PSA spokesman and government sources said last week. The news disappointed Daewoo-FSO’s management and workers, who had hoped the plant would attract the E1.5 billion project.

   “PSA and Toyota are only thinking of a typical greenfield investment,” Edward Nowak, Poland’s deputy economy minister told the Business Journal. “A takeover of Daewoo-FSO would be too risky and too costly for them.”

   Daewoo-FSO, Poland’s second-largest car plant, has been struggling to exit the foundering Korea-based Daewoo Motor since it declared bankruptcy in late 1999.

   Although Poland is considered a strong candidate for the plant, which is slated to produce some 300,000 cars annually, Warsaw is not, according to Marc Ferrant, spokesman for PSA.

   “It will rather be a greenfield investment,” Ferrant confirmed. “As far as I know, we’re not looking for an existing plant.”

   Meanwhile, representatives of Daewoo-FSO expressed frustration with news that they would not win the French-Japanese investment.

   “I can’t imagine why they want to build a new plant, while there is one in Warsaw,” said Krystyna Danilczyk, Daewoo-FSO’s spokeswoman.

   Daewoo-FSO’s efforts to separate itself from its mother company have been stalled by the Korean company’s creditors. Polish government officials, including Nowak, have not been permitted to hold official talks with potential investors despite media speculations that a number of global automakers (including PSA and Toyota) would be interested in taking over the Warsaw plant.

   According to Danilczyk, if PSA and Toyota want to locate their project in Poland, then buying the Daewoo plant in Warsaw is the best way to accomplish this as the facility already exists and would be much cheaper than a greenfield project.

   “The staff has undergone thorough training and the plant has state-of-the-art technology,” she said. “For example, we have the most modern painting facility in Europe.”

   Danilczyk also said that PSA and Toyota would not have to make major changes to the plant to adapt it to their needs.

   “An adaptation wouldn’t take more than two months,” she said.

   But according to Nowak, the scale of the PSA/Toyota venture would make taking over an existing plant too risky.

   “It’s better to avoid such a high risk in a big project like this,” he said.

   Another strike against the Warsaw plant is its proximity to downtown, industry players said.

   “The French and Japanese could theoretically be interested in the Warsaw plant, but its location in the city speaks against it,” said Wojciech Drzewiecki, owner of the auto market research firm Samar.

   According to Drzewiecki, the high price of land near the city would make expansion of the Warsaw plant more expensive than in more rural areas.

   Nowak also cited the capital’s high costs as another factor against Daewoo-FSO attracting the investment.

   “The city of Warsaw is simply too expensive,” he said. “To give you an example, a secretary in Warsaw costs a company as much as a manager in Kraków.”