Rover’s proposed investment in Poland would boost its overall production capacity and develop its presence in Eastern Europe. It could also save troubled manufacturer Daewoo-FSO, which has been struggling since the bankruptcy of its parent company, Daewoo Motors.

Daewoo-FSO Motor Polska, once the biggest car manufacturer in Poland, could be rescued from bankruptcy if British manufacturer Rover implements plans that would allow it to assemble cars at its Polish plant. Rover, whose investment could potentially reach up to €1 billion, would start producing its Rover 75 in May next year, mostly for exports.

US giant General Motors bought South Korea’s bankrupt Daewoo Motors in 2001, but it declined to purchase the Polish operation Daewoo-FSO. Since then, it has teetered on the brink of insolvency. Daewoo handed over management of the factories to the Polish treasury, which now controls nearly 19% of the shares. Daewoo still controls 80% of Daewoo-FSO shares, and the remainder are in the hands of small shareholders. A deal reached with Korean investors and Polish banks last year staved off bankruptcy, but it remains only a short term solution.

Daewoo-FSO needs further investment and strategic planning to compete against manufacturers like Fiat, GM and Volkswagen, which already have plants in Poland. FSO was once the market leader and manufacturer of the Polonez, the ubiquitous Polish car of the communist era. The company now needs to adapt to a changing market, which has become attractive to foreign investors as the country awaits its accession to the EU. Rover’s investment should prove a major help in this process.

Like several other eastern European countries with skilled labour that are competing for automotive investment, Poland would offer a low cost manufacturing base for the British manufacturer. With Daewoo-FSO currently focusing on increasing its annual sales to neighbouring Ukraine from 30,000 to 50,000 vehicles this year, Rover’s alliance with the company could enable it to exploit potential opportunities further afield in the Balkans and Russia.

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