The Romanian government wants to buy complete ownership of Daewoo Romania so it can resell it to a major automaker and avoid a shutdown this autumn.
Romanian officials offered E32 million to Daewoo Motor Co., for 51 percent of Daewoo Romania. Romania owns the other 49 percent.
Daewoo Motor rejected the offer as too low, but is continuing to bargain with Romania, said a member of Daewoo's overseas management team.
"We're still negotiating," said the official in Incheon, South Korea.
A Romanian Ministry of Economy and Commerce spokeswoman confirmed the talks are continuing but provided few details.
"Daewoo Romania is under negotiation," said Iuliana Dumitru.
Romanian officials believe finding a strategic buyer -- a financially strong automaker looking for eastern European production capacity -- would be easier if the threat of Daewoo creditors were eliminated, say sources in Romania.
The Daewoo Romania plant in Craiova was one of the 13 assembly plants worldwide that General Motors and affiliates did not buy when creating GM Daewoo Auto and Technology Co. in 2002 from the assets of then-bankrupt Daewoo Motor.
Romanian press reports identify potential buyers as Renault, which owns Romania automaker Dacia and lacks capacity to make more of the hot selling Logan; Ford; General Motors; and Chinese automaker Chery.
"Renault would be the obvious candidate," said Ewa Root, Global Insight's specialist for eastern Europe. "They are already established in the country and because the Logan is doing extremely well, they will need extra capacity."
A spokesman in Paris said Renault has not been approached.
Chery has no interest in eastern European production right now, said a member of Chery's European team in China.
Ford declined to comment. General Motors declined to discuss the future of Daewoo Romania.
"That is a matter for Daewoo Romania, the Romanian government and GM Daewoo in Korea," said Andras Danos, a GM spokesman in Budapest, Hungary.
Facing a deadline
Romania has a deadline to find a buyer for Daewoo Romania.
The complex 280km west of Bucharest has a relatively modern assembly plant with 200,000-unit annual capacity. Daewoo invested $800 million in 1994 (currently E660 million) to update the one-time Citroen plant.
The operation also has a powertrain plant that makes three different five-speed transmissions, builds engines and has aluminum casting capability.
But in October its license to build its existing products -- the Daewoo Matiz, Solenza, Cielo and Nubira -- expires. Production fell 8.6 percent in the first half to 12,873 units.
Daewoo Romania spokesman Valeriu Girlea said the company is negotiating with GM Daewoo to extend the supply agreement.
"There is a good possibility that the supply of production parts will continue beyond October -- only it hasn't been agreed officially," he said.
Even with an extension, Daewoo Romania's appeal in the Romanian market is slipping as its models age.
"The Daewoo Matiz has to put up with an important competitor starting, the new-generation GM Matiz, [called] the Chevrolet Spark," said PricewaterhousCoopers analyst Daniel Anghel in Bucharest.
The unpaid debt issue
Romania needs more than the 51 percent equity held by Daewoo Motor. Daewoo Romania also owes $300 million to various other Daewoo subsidiaries. These debts have been restructured into Daewoo UK Recovery, a special corporate entity designed to sort out Daewoo's debts.
"Ultimately, we are the largest creditor," said Michael Nissim, a lawyer at McDermott Will & Emory in New York. "If these claims are not met monetarily, we would have a substantial interest in the factory."
McDermott Will & Emory has represented KAMCO, the Korea Asset Management Corp., in liquidating debt left behind by Daewoo's global expansion and collapse.
Bad debt has been a deciding factor in sales of Daewoo factories in the Czech Republic and Poland.
Avia, Daewoo's heavy-truck manufacturing operations in the Czech Republic, were taken over in April by Odien Restructuring Services. Odien transformed debts it had bought into a 98 percent stake in Avia through a debt-to-equity swap.
Polish automaker FSO's bad debts were a critical issue in the company's sale to Ukranian automaker UkrAVTO. The Ukrainians positioned themselves as the only potential partner by purchasing FSO's unpaid debts from Polish banks.
-- Norman Thorpe, Alysha Webb and Sylviane de Saint-Seine contributed to this story