Chery to takeover FSO Zeran?

9th July 2010

© Cezary Piwowarski, wikipedia.o FSO may soon be taken over by Chinese car manufacturer Chery Share:

The saga of Polish car manufacturer FSO Zeran looks set to take another twist with the Chinese car maker Chery expected to take over the ailing concern.

Citing a source close to the company, the newspaper Dziennik Gazeta Prawna said that Chery was on the verge of purchasing the Warsaw-based producer from the Ukrainian firm UkrAvto, although the Indian manufacturer Tata was also rumoured to be mulling over setting up shop in Poland.

“I can’t confirm or deny [who we are talking with]. But we want to finalise the talks as soon as possible,” said Janusz Wozniak, the president of FSO Zeran.

That somebody appears willing to take a controlling stake in the troubled car plant, which builds the Chevrolet Aveo II, Lanos and Matiz, should come as welcome news.

Along with suffering from the declining fortunes of the western European car sector, FSO has been pummelled by a dramatic drop in car sales in Ukraine. This, along with the need for inventory controls, led to a number of stoppages at the plant in 2009 and 2010, and a significant drop in production.

From January to May this year only 15,500 units rolled off the plant’s production line, a 50 percent drop, year-on-year, compared to 2009. This, said analysts, means that FSO will fall well short of producing enough cars to keep it in the black.

“For FSO to stand on its own two feet it needs to produce about 100,000 cars a year,” said Rafal Orlowski, from the consultancy AutomotiveSuppliers.pl.

In an effort to keep afloat in a turbulent sea, in June the plant’s 1,870 employees decided to take a 20 percent pay cut.

One of the largest vehicle manufacturers in China, the state-controlled Chery is, apparently, looking for a plant to build its QQ model. The QQ bears a strong resemblance to the Aveo so adjusting the plant to new production should not involve too much in the way of time and investment.

Moving into Poland would also give Chery a foothold in the European market.

Question marks hanging over FSO’s future have become an almost fixed fitting over the past 10 years.

From 1995 to 2000 the plant was owned by Daewoo until the Korean manufacturer went bankrupt in spectacular fashion. Although the Polish government, which had a significant stake in the plant, managed to secure the production of various vehicles, FSO Zeran has lived a hand-to-mouth existence for a number of years as it looked for buyer.

At one time FSO even flirted with the now defunct British producer MG Rover.