Re-privatization – high hopes and huge headaches

Newsroom 05/09/2007 | 16:50

Most players in the automotive industry agree that the privatization of Daewoo's Craiova plant will be as significant as the privatization of Dacia has been.
The coming of Renault to Pitesti had the knock-on effect of generating more than EUR 1 billion in investment from producers of automotive parts. Renault's growing business in Romania and the potential of Eastern European markets has boosted the production of car parts.
The resulting wave of foreign investment into the country is expected to exceed EUR 8 billion by 2010 and should have an accumulated turnover of between EUR 9 and 12 billion, according to ACAROM, an employers and professional association comprising commercial companies overseeing the automotive industry.
Daewoo Automobile's re-privatization has yet to come to fruition. The composition of the company's privatization commission was in doubt after several members announced they were withdrawing last week over the issue of whether commission members should receive a fee or not.
The decision that they would not receive a fee produced the return this week of the original members of the commission: Trade and Commerce Minister Varujan Vosganian, AVAS president Teodor Atanasiu, state secretaries Razvan Oraseanu and Laszlo Gyerko, Transportation Minister Radu Berceanu and Labor Minister Gheorghe Barbu.
The government will begin privatizing Daewoo Automobile Romania in March.
The Romanian state increased its share in the company from a little over 20 percent to 72.4 percent last year when it paid South Korean carmaker Daewoo Motors $60 million, which also bought out the plant's debts. SIF Oltenia has a 22 percent share in the company.
After the success of their Cielo, Tico and Matiz models, the company went through a transition phase when majority shareholder Daewoo Motors suffered financial problems and was partly bought by General Motors.
However, the Romanian branch of the company was not included in the transaction. In the opinion of Daewoo officials, the company does not need to be restructured before being privatized again.
Management is preoccupied with keeping the company afloat until it is taken over by other investors.
The calendar advanced by the government seems to accord with this, as such a process could
not be completed in just a few months.
Among the companies that showed interest in the Craiova plant were General Motors, Renault-Dacia and Cherry, with no official intentions having been stated yet by any of them.
Ford Motors, however, has announced its intention to acquire Daewoo Romania. “We will continue to develop our business plan, and be prepared to pursue due diligence when the government begins the privatization process,” Ford stated. Until a final decision is made on the privatization and buyer, however, the company has refrained
from further comment on the subject.
Ion Tiriac, president of Tiriac Holding, told Business Review that Ford has a “specific” development plan for the company, should they succeed in taking over the Craiova plant.
Tata Motors from India has sent a letter of intent for the Craiova plant last week, the delegate minister for foreign trade, Iuliu Winkler said. In his opinion, the state's main objective is not to receive a specific sum from this privatization, but rather to attract a good long-term development plan.
Company representatives expect turnover to have increased by 20 to 30 percent, to about $350 million in 2006 over the previous year, mostly due to a 250 percent increase in engine production and about 60 percent in gearbox production. Car production at the Craiova plant also increased in 2006, by about 10 percent.

Roxana Mihul

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