Romania rushes to complete plant buyout

By Lyle Frink, Automotive News Europe

Craiova, Romania - The Romanian government is racing to complete its $60 million (€47 million) buyout of the struggling Daewoo Automobile Romania plant.

Romanian officials expect to quickly complete the purchase of a 51 percent stake from creditors of Daewoo Motor, the plant's former owner, which went bankrupt in 2000. The Romanian state already owns the remaining 49 percent.

"The money goes to Korea in the first 10 days of October - then we will look for a big investor," said Lucian Lutaru, general director for SC Automobile Craiova, the company managing the assembly and powertrain plant. "The contract has conditions that have to be finished in three months [from August 30], but I think we will be finished more quickly."

Romania wants to resell the plant to a new customer before the country becomes part of EU January 1. Beating the deadline allows Romania to give the new owner more incentives, such as tax breaks, which will be more tightly regulated once the country is in the EU.

Condrut Seres, Romania's minister of the economy and commerce, is responsible for finding a new buyer. His office declined to discuss bidders.

General Motors and Ford have said they are interested in the plant.

Ford of Europe CEO John Fleming has toured the plant.

He told Automotive News Europe that the automaker is considering a bid as part of an effort to boost capacity in eastern Europe.

"It's a good fit because I believe there's still an opportunity to grow inside Europe," Fleming said. "Romania is a good place to export from."

Renault won't bid

Renault will not bid for the Craiova plant, Luc-Alexandre Menard, chairman of the automaker's Romanian unit Dacia, said at the Paris auto show. Instead Renault will expand its Dacia plant in Pitesti to meet booming demand for its Logan.

Last year, the Craiova plant made only 21,000 cars, primarily the Daewoo Matiz minicar under license from GM's Daewoo Auto and Technology, formed in 2002 when GM and partners took over most assets of Daewoo. That is only 17 percent of its 125,000-unit capacity on two shifts. But the factory is scheduled to make 140,000 engines and 191,000 transmissions this year, close to its 200,000-unit capacity for each.

Most cars are sold within Romania. Excess engines and transmissions are exported to other former Daewoo plants in Ukraine, Poland and Uzbekistan. The Polish FSO factory in Warsaw and the Ukraine ZAZ plants are owned by UkrAVTO.

UkrAVTO is building cars for GM to sell in Russia and is negotiating to bring Chevrolet production into Warsaw. So GM already has a relationship with the plant. But there are other links too.

"The factory works according to GM principles," Lutaru said.

Most of the Korean employees that once worked with the Craiova factory now work for GM Daewoo, said Valeriu Girlea, spokesman for the factory.

And GM Daewoo supplies components for the Matiz and kits for other Daewoo models.

At that time, Seres said Romania would consider selling the factory with investment incentives. Romania's ability to grant incentives will be limited once the country joins the EU on January 1. Under EU regulations, automotive investment incentives are capped at 15 percent.

From Automotive News Europe (A Crain publication)