General Motors, the world's biggest carmaker, is considering taking a minority stake in a Ukrainian-owned car factory in Poland as part of negotiations to build Chevrolets at the plant, according to people close to the talks, FT reported.
The FSO facility in Warsaw, controlled by Avtozaz of Ukraine since last year, has the capacity to produce 350,000 cars a year but the plan being discussed would see it start in the tens of thousands and build up eventually to about 100,000. The cars would be sold by GM in Europe through its existing dealer network.
The talks have reached an advanced stage but people close to the two companies cautioned that Avtozaz was also talking to other carmakers and the deal had been repeatedly delayed. As well as the option of taking a stake, GM is considering simply outsourcing production to the FSO factory.
"The Ukrainians have a huge amount of capacity they can't utilise at the moment so they are keen to find a partner," said one person familiar with the situation. Avtozaz confirmed talks were under way with several carmakers but refused to give details. GM declined to comment.
GM is understood to be the frontrunner in the bidding, helped by its contacts with Avtozaz, which assembles Chevrolet models, among others, at its base in Zaporozhye, Ukraine.
The FSO move would help GM cope with a lack of capacity at the South Korean factories of its GM Daewoo subsidiary, which has recovered more quickly than expected since GM took control in October 2002. All the Chevrolet-badged models sold in Europe are built by GM Daewoo, which could only increase output at its existing plants by adding night shifts.
GM is also keen to bolster its support for Avtozaz to make up for its crumbling relationship with Avtovaz, the Russian manufacturer of Ladas. Avtovaz brought its joint venture factory with GM to a halt last month by withholding vital components.
While production has restarted, the future of the project remains in doubt. Chevrolets built by Avtozaz in Ukraine are being shipped to Russia duty free. It is understood that GM could also re-enter the bidding for a former Daewoo factory in Romania, which the government is trying to sell.
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