Daewoo Asks Poland to Withold Duty-Free Status from Hyundai

09/19/96

The Associated Press reported that South Korea's Daewoo group has threatened to limit or pull of its Polish automobile operations if the Polish government grants a duty exemption on car parts to its rival Hyundai.

The Polish Daily Zycie Warszawy has published a report that Kim Woo Choong, Daewoo's president, wrote to Prime Minister Wlodzimierz Cimoszewicz and demanded that the Polish government protect interests of domestic manufacturers over those that assemble cars from parts made elsewhere.

Daewoo has manufactured and assembled cars in Poland since 1995, and was one of the first automakers to receive an exemption from paying duty on imported car parts when new regulations went into effect at the end of August.

Hyundai started assembling cars in Plonsk last month, in a joint venture with Poland's Universal SA. Hyundai uses imported parts, but has not yet received a permit exempting it from import duties.

Trade and Industry Minister Klemens Scierski has opposed granting Hyundai the exemption. Scierski said companies like Daewoo, which employs about 25,000 Poles, should be given priority over companies "that don't invest a single dollar in the country." He also said that the Hyundai-Universal venture did not qualify for exemption, as it did not start assembling cars before the new import regulations took effect on August 24.

Poland's government hopes that it can encourage foreign producers to make long-term investments in the country's manufacturing infra-structure by granting individual duty exemptions. The previous law provided blanket exemptions for carmakers that assembled more than 1000 cars annually. Companies that operate in Poland without an exemption will pay duties that range from 6.6 percent to 35 percent on imported components.

Daewoo acquired a majority stake in the formerly state-owned passenger car factory, Warsaw's Fabryka Samochodow Osobowych, in November, and says it is committed to investing $1.1 billion in the plant over the next six years. Kim said that granting all assemblers and manufacturers equal duty exemptions would result in a lack of protection for Daewoo, and could force the company to renegotiate its agreements with the Polish government and even drop its investment plans.

Paul Dever -- The Auto Channel