MG Rover closer to Polish deal

Shareholders in troubled Polish car venture Daewoo-FSO Motor Polska decided today to create a new company, a move that could open the way for British car maker MG Rover to help save the factory from bankruptcy.

The motion to create the new company is still to be accepted by a court in Korea which is overseeing the bankruptcy of Daewoo, and by the Korean company’s creditors.

“The motion opens the way to conclude negotiations with MG Rover,” said Krystyna Danilczyk, Daewoo-FSO’s spokeswoman.

Daewoo-FSO, a car plant in Warsaw and Daewoo’s largest in Poland, is in negotiations that could see MG Rover take a 25% stake in the new company. Poland’s Treasury and Daewoo-FSO’s creditors would also hold shares, the latter in exchange for debt.

“We are nearing a finale, but the negotiations are difficult and it’s not clear yet whether they will be successful,” said Zbigniew Gryglas, a representative of the Treasury which holds 9.2 percent stake in the factory.

Two other Polish Daewoo operations, a car factory in the eastern city of Lublin and a light-truck plant in the city of Nysa, were declared bankrupt earlier this year, because of debt and lack of support from their Korean parent.

Daewoo-FSO also has suffered losses and laid off workers, but so far has avoided insolvency.

The troubles coincide with a slump in the Polish vehicle market and add to headaches for Prime Minister Leszek Miller, who is struggling to keep election pledges to put more Poles back to work.

Poland’s unemployment rate has soared above 17%.

Daewoo Motor Company of South Korea filed for bankruptcy last November after amassing £11 billion in debt. .

MG Rover was sold by Germany’s BMW in 2000 for a token sum after racking up huge losses. Earlier this year, it formed a joint venture to build cars in China for worldwide export.