Ukranian automaker UkrAVTO is negotiating with General Motors to start licensed production of Chevrolet cars by 2007 at the FSO factory in Warsaw, Poland.
The talks come as UkrAVTO and ZAZ, its manufacturing subsidiary, are taking control of Polish automaker FSO. In December, UkrAVTO began negotiating to buy the Polish government’s controlling stake in FSO. Also in December, the Ukrainians completed the purchase of FSO debts – which are secured by the Polish automaker’s assets – from several Polish banks.
“ZAZ will secure a license agreement necessary to launch the new model production by FSO,” said UkrAVTO spokesman Mandzyuk Yulya.
GM says its relationship with UkrAVTO is “exceeding good,” but its responsibility to FSO does not extend beyond supplying kits from affiliate GM Daewoo through December 2006.
“We are not party to any discussions – official or unofficial – of what FSO could do in the future,” said Chris Lacey, GM executive director for central and eastern Europe, in Budapest, Hungary.
Beyond obtaining GM licensing, the project to build Chevrolets at FSO also depends on a UkrAVTO study of Polish market conditions and technical due diligence of FSO production capacities, Yulya said.
Financially shaky FSO must find something to build once its rights to build the first-generation Daewoo Lanos (code-named T-100) and Matiz expire in 2006.
The Polish automaker was not included in the assets that GM and its partners selected from the bankrupt Daewoo to form GM Daewoo Auto and Technology in 2002. FSO won its independence from the remnants of Daewoo and a two-year extension to build existing models. It boosted production to more than 43,000 units last year from 25,016 in 2002, according to auto research firm JATO Dynamics.
But FSO is heavily dependent upon UkrAVTO and ZAZ after British automaker MG Rover dropped its takeover bid last fall. The Ukrainians take 80 percent of FSO production and provide FSO with cash to make advance payments to suppliers.
“ZAZ is [FSO’s] only chance to survive,” said Ewa Root, a London-based market analyst for consulting firm Global Insight. “We think it is possible for ZAZ to move [the new-generation Lanos] or even some Chevy production to Poland.”
ZAZ already has a close relationship with GM. ZAZ started building the second-generation Lanos (code-named T-150) last month at its plant in Zaporozhe, Ukraine.
In February, ZAZ signed a deal with GM subsidiary Opel to build the old-generation Astra from complete knockdown kits. In addition, ZAZ is currently assembling Chevrolet-brand (formerly Daewoo) cars from kits manufactured in Korea.
ZAZ production was 23,822 units in 2002, rising to 69,582 in 2003, says Root.
UkrAVTO grew out of the formerly state-owned Ukrainian auto maintenance department to become a vertically integrated industrial group that includes car manufacturing, sales, and maintenance. It controls the ZAZ factory jointly with Swiss-based investment company Hirsch & Cie.