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East: Decision On Daewoo's Future Expected Soon

Negotiations are expected to be completed soon on a deal for the giant U.S. automaker Ford to take over the near-bankrupt Daewoo car company of South Korea. Daewoo has factories in Central and East Europe and the ownership change may offer some of those facilities a new lease on life. RFE/RL correspondent Breffni O'Rourke reports.

Prague, 7 September 2000 (RFE/RL) -- Ford's $7 billion takeover bid for Daewoo should be completed by the end of this month, if all goes according to plan and there are no unexpected setbacks.

Senior officials of both companies have told RFE/RL that negotiations are in full swing, with Ford describing the talks as being on a "good track." The U.S. company says a survey of Daewoo's internal affairs is now completed, and the negotiations are focussing on details of the bid and what it will cover.

The Daewoo empire includes factories and joint ventures in Romania, Ukraine, Poland, and Uzbekistan. Most, if not all, of these facilities are thought to be running at a loss, and their future is clearly in question.

But one good sign is that, nevertheless, Ford is apparently interested in buying all of them. As the executive director in charge of Daewoo's negotiations with Ford, Han Young-Chua, told RFE/RL from Seoul:

"We are talking over a lot of things with Ford right now, and since we do not have any final proposal from them yet, we do not know exactly what their final proposal will be. [But] we are continuing discussions on the presumption that they will end up by taking over all the subsidiaries".

Ford's interest in the subsidiaries is based on the knowledge that Daewoo's attractive range of cars has achieved solid sales in the emerging markets. A spokesman of Ford's Overseas affiliates Division, Paul Wood, speaking from Ford headquarters at Dearborn, said:

"Daewoo's European presence, particularly in Central Europe and Eastern Europe, fills a gap in Ford's product line-up, I mean Daewoo's brand is very strong in East and Central Europe, that's something which would be attractive to Ford".

But analysts caution that not all the Daewoo factories can be seen as equally valuable to Ford or any other prospective owner. The star among them is undoubtedly the former FSO facility outside Warsaw in Poland. That modernized, high-volume factory has allowed Daewoo to capture a dominant sales position in the Polish market. And as Poland is expected soon be joining the European Union, it also offers a cheap manufacturing base for sales into the huge West European market.

At the other end of the scale is the AvtoZAZ-Daewoo joint venture at Zaporizhe in southeast Ukraine, where production is low and prospects appear dim. Recently, a senior company official was quoted in the Ukrainian press as saying that a team of experts sent by Ford, who had visited Zaporizhe, had displayed what he called "zero" interest in the plant.

In the middle of the equation lies the Romanian plant at Craiova. Auto industry analysts say that even if Craiova is presently under-utilized, a new owner could find it strategically important in view of its position in the heart of southeast Europe -- a potentially lucrative market.

Craiova's public relations chief, Radu Andrei, is optimistic. He said the recent assessment visit by a team of Ford experts had gone off well:

"Well, as I know, they were very satisfied -- even surprised -- to see the level of our facilities, the high level of technology [we have here]."

Andrei noted that the factory has recently acquired a positive quality-control rating from the German TUV organization (Technische Ueberwachungs Verein).

The plant is currently running well below its full capacity, and there has been a downturn in the local Romanian market. But Andrei says that, in contrast, exports to China from the Craiova plant have been growing strongly.