GM invests $75 million in venture with Poland Plant near Warsaw will assemble Opels

February 29, 1992|By Donald Woutat | Donald Woutat,Los Angeles Times

DETROIT VHC U*B — DETROIT -- General Motors Corp. and the Republic of Poland announced a $75 million project to assemble GM's Opel-designed cars at a plant near Warsaw, one of the biggest investments by a U.S. company in that Eastern European nation.

The project -- GM's fourth manufacturing venture in Eastern Europe -- reflects the stark contrast between the fortunes of the automaker's European unit, which is gaining market share and making profits, and GM's shrinking, money-losing U.S. vehicle business.

Already, GM has invested more than $800 million in Eastern Europe, even as it carries out plans to shut 21 North American factories and eliminate 74,000 domestic jobs in the next three years.

GM and the Polish ministries of privatization, industry and finance said negotiations are under way on more ambitious projects that could boost investment beyond $300 million by 1996.

"What needs to be pointed out is that this has absolutely nothing to do with the United States," said Ronald Theis, a Detroit-based spokesman for GM's international operations. "It is funded entirely by European borrowings and earnings, and is a step in ensuring a viable position in the growing European market. None of the vehicles will be exported to North America."

Volkswagen and Fiat have been the most aggressive among European auto companies to move into Eastern Europe. The only other U.S. auto company to venture there is Ford Motor Co., which is building an $80 million plant in Hungary to make fuel pumps for export to its Western Europe assembly operations.

However, Ford officials and executives of Japanese automakers have expressed doubts about the immediate value of investing heavily in Eastern Europe, questioning whether consumers will have enough money to buy cars and pointing out that other areas of the world are growing faster.

Americans also have complained of bureaucratic red tape. GM abandoned a transmission plant in Czechoslovakia last year because of political problems.

GM's project, announced in Poland, is more modest than Polish government officials had been hinting at and is smaller than Italian automaker Fiat's Polish undertakings. But government leaders attach great importance to GM's involvement, hoping it will attract more Western investors.

The deal is sketchily spelled out in a memorandum of agreement between GM and Fabryka Samochodow Osobowych (FSO), a Polish auto company, to assemble 35,000 Opel Astra cars annually with components imported from Western Europe. FSO's initials in Polish stand for Passenger Car Factory. The deal calls for GM to invest up to $75 million.

"The $75 million is an initial step, but there will be a multiplier effect," said Robert Eaton, president of GM Europe. "I think if our project with FSO materializes, our investment will exceed the amount invested in Hungary."

Mr. Eaton was referring to two Hungarian projects valued at $300 million. A $200 million engine and car assembly complex in Szentgotthard is to begin production for export in two weeks in a joint venture with a Hungarian company, and GM's Packard Electric division has begun making wiring harnesses in western Hungary.

GM also has invested $650 million in an assembly plant under construction in Eisenach, in the former East Germany. It is to begin car production this fall.

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