WARSAW, Poland -- Ukrainian automaker AvtoZAZ is close to taking over the former Daewoo-FSO operations in Warsaw.
AvtoZAZ submitted the only bid to buy the Polish government's 20.36 percent share of FSO, said Agnieszka Dluzka, spokeswoman at the Polish Ministry Council. Poland has invited AvtoZAZ to negotiate details, but has not yet set a date to begin talks.
"We have a purchase offer from AvtoZAZ and only AvtoZAZ for FSO," she said.
AvtoZAZ is in a strong position to buy FSO after China's Shanghai Automotive Industry Corp. and the UK's MG Rover dropped out of the bidding.
AvtoZAZ is FSO's primary customer. It buys most of its production from the Warsaw plant for resale in the Ukraine. AvtoZAZ has given FSO advance payments so it can pay for parts, suppliers say.
It also is buying unpaid FSO debts from six Polish banks.
FSO originally owed 780 million Polish zloty (about E185 million), but an FSO spokeswoman said much of that was restructured in 2003. She did not say how much FSO still owes or how much AvtoZAZ is paying to buy the debt. She said four banks have sold the uncollected FSO debts and the remaining two are negotiating with AvtoZAZ.
FSO and AvtoZAZ have similar roots. Both were their country's main automaker in the post-WWII communist regime before being acquired by Korean automaker Daewoo in the early 1990s. Both acquired their independence after Daewoo went bankrupt in 2000, but then their fortunes changed.
FSO did not win its independence from the legal tangle until late 2003. It executed an equity-for-debt swap, but is short of capital.
It has legal permission until 2006 to assemble the Daewoo Lanos and Matiz. After seeing output drop to 34,000 cars in 2003, FSO hopes to produce 60,000 this year. But most are kit versions of the Lanos shipped to AvtoZAZ.
In contrast, the UkrAVTO group of dealerships and repair shops purchased a controlling stake in Avto-ZAZ from the Ukrainian government in 2002. Now AvtoZAZ is controlled jointly by UkrAVTO and Swiss-based Hirsch and Cie investment group, which has provided capital.
UkrAVTO made deals with Russia's AvtoVAZ and General Motors. In 2003, AvtoZAZ started making VAZ 21093 and 21099 cars at its plant in Zaporozhye. It added Opels earlier this year. It also assembles FSO's Lanos kits, adds a locally produced 1.3-liter gasoline engine and transmission and sells them as the Sens in Ukraine.
AvtoZAZ also has political protection.Ukrainian legislators last year gave local producers tax advantages and increased taxes on some imported vehicles. As a result, analysts expects the ZAZ market share to climb to 59 percent this year from 41.6 percent of the Ukraine's 155,000 cars sales last year.