GM To Build Chevrolets in Poland?

FRANKFURT, June 25, 2006; Reuters reported that General Motors is in advanced talks with Ukrainian automaker UkrAvto on forming a joint venture to manufacture Chevrolet cars in Poland, a spokesman for the U.S. carmaker said on Sunday.

"We are talking to them and are making good progress in the talks," he said, stressing the point was to make entry-level brand Chevrolet cars in Europe, not to shift production of Opel/Vauxhall brand models from its plants in western Europe.

The partners already cooperate to make Chevrolets in Ukraine, so it made sense to discuss making cars at the FSO plant near Warsaw that UkrAvto's manufacturing unit, AvtoZaz, now owns, the GM spokesman said.

"Any discussions we might be having with the Ukrainian partner in Poland would refer to Chevrolet. We are looking to find a solution for Chevrolet in Europe. This has nothing to do with Opel," he said.

GM is beefing up European production of Chevrolet, which the group has been importing to Europe from South Korea.

The Automotive News Europe industry paper cited unidentified sources as saying the joint venture would build the Chevrolet Aveo small car in Poland. It said output would start at around 25,000 units by year's end but could rise quickly.

GM Europe faces a wave of industrial action over its plans to close an assembly plant in Portugal by the end of October unless workers and the Portuguese government find ways to cut manufacturing costs by 500 euros ($630) a vehicle.

Labour leaders say the move reflects GM's desire to scale back expensive production in western Europe and expand in eastern Europe and Asia to profit from lower costs.

GM insists this is not the case but stresses that plants in western Europe need to be extremely productive to offset higher labour costs. Automotive News quoted Klaus Franz, head of GM Europe's works council, as saying that building Aveos in Poland could trigger more capacity reductions at GM plants in western Europe and one day lead to building compacts Corsas in eastern Europe.

Separately, the paper quoted GM global purchasing head Bo Andersson as saying in an interview that the world's biggest carmaker intended to shrink the number of major "Tier 1" suppliers it uses to around 500.

GM said January it had cut its supplier base to 3,200 companies from 3,700, or 14 percent, in the past 12 months.

"We are seeing a reduction in the number of our supply base," Andersson said. "At the same time, we're gaining lots of new suppliers. Most are privately held Chinese companies."

GM spent $86 billion on materials last year but that sum will fall in 2006, Andersson told reporters last week.