Wednesday, January 17, 2001

Daewoo pulling toward partner? Italy's Iveco rumored to be interested in Prague truck facility By Leah Bower and Lisa Gonderinger It's not been an easy year for Daewoo Avia, one of the country's largest makers of heavy trucks. Sales have hit the brakes by almost 10 percent and losses are expected to grow to 400 million Kc ($11 million). The future of the company's Prague plant, which employs close to 2,000 people, has hung in uncertainty ever since its South Korean owner, Daewoo Motors, went bankrupt. More than 350 workers were laid off, and pickets and strikes followed. A string of rescue attempts by industry giants like Ford Motor Co. have fallen through. But 2001 could finally bring the driver Prague's Avia has been hoping for. According to the economic magazine Euro, Italy's Iveco, which already has a presence on the Czech market, signed a tentative deal Dec. 27 to take over Daewoo Avia. The plan still must be approved by all the parent company's creditors, according to Euro. Iveco officials could not be reached for comment. But Martin Jahn, CEO of CzechInvest, the country's foreign investment agency, said the partnership would make sense. "Such a purchase would probably be more about lower production costs for Europe and Eastern Europe," he said. Iveco is the commercial division of Italy's Fiat SpA, best known for its Masserati, Alfa Romeo and Ferrari sports cars. Fiat and U.S. giant General Motors Corp., which formed their own strategic partnership last year, have been negotiating to buy Daewoo Motors for months. In the process, they've been looking at plans to parcel off subsidiaries like Avia, according to industry reports. Daewoo has 12 plants in 11 countries. Changing times Avia once led a proud Czech truckmaking industry that pumped 50,000 vehicles off its lines each year. But as the artificial boosts of communism disappeared, many couldn't compete. Daewoo, then an up-and-coming Asian powerhouse, seemed a savior when it took over the struggling Avia and its Prague plant in 1995. It had grand visions of investment, new models and major marketing. But Daewoo consumer car sales fell and overexpansion made costs unbearable, leaving subsidiaries like Avia floundering from lack of attention and funds. The Czech heavy truck industry -- whose production has trickled to a mere 3,000 vehicles a year -- is now filled mostly with foreigners like Mercedes Benz and Iveco. Only four of the 15 heavy-truck makers remaining are Czech: Avia, Tatra Koprivnice, Skoda Mnichovo Hradiste and Praga. Antonin Sipek, director of Prague's Automotive Industry Association, said demand would support a reborn Avia -- with the right management. Despite its troubles, the company still commands about 20 percent of the Czech market. Plus, the domestic sale of trucks, both Czech-made and imported, rose 26.30 percent in the first 10 months of 2000. This isn't the first time, however, that hopes have risen for Daewoo or Daewoo Avia. In mid-2000, international truckmaking giant Ford moved into the final stages of a $7 billion purchase of Daewoo. But Ford backed out in September, Daewoo Motors' credit dried up, and the company was thrown into receivership in November. A Korean judge will decide this month whether proposed plans of Daewoo and its suitors are enough to warrant a sale, or if liquidating the massive company would be the best answer. Since Ford fell through, GM and Fiat -- who were eliminated from the earlier round of bidding that Ford won -- have been negotiating with Daewoo. Officials from the companies say they are still interested in the Korean manufacturer, for the right price. Skeptics say they are holding out because they're the only real bidders to surface. According to Euro, Iveco wasn't the only choice for selling off Avia. Talks were held with Renault of France and Swedish truckmaker Scania, but nothing materialized. While Iveco splurged on a flurry of acquisitions in the late '80s and early '90s -- including Italian firms Astra, Sicca and Baribbi and Germany's Bachert -- activity has quieted in recent years. But Sipek said picking up Daewoo Avia would be a smart way to start adding to its fold again. "The one who buys Daewoo Avia will not lose," he said. "A foreign partner who would buy Daewoo Avia would gain a new product, a modern plant and a share of the Czech market." 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