In EU first, GM launches Chevrolet production in Poland

US giant General Motors on Tuesday launched production of the Aveo economy car at a plant in Poland, marking the first time a vehicle from the Chevrolet brand has been built in the European Union.

The Chevrolet Aveo is being produced in Poland under a deal between GM and the Ukrainian company UkrAvto, which owns the FSO plant in Warsaw.

GM, which already produces the Aveo in its plants in South Korea, said it plans to turn out a combined total of 70,000 1.2- and l.4-litre versions of the cars in Warsaw in 2008.

The Polish-produced vehicles will initially be destined for the Ukrainian and Russian markets, but will go on sale in the European Union in April.

In 2009, production is to be beefed up to 100,000 cars a year. The estimated production capacity of the FSO plant is 240,000 a year.

The Chevrolet launch marks a homecoming for what was a cult brand in Poland before World War II, said FSO head Janusz Wozniak.

Chevrolet set up a factory in Poland in 1928 but the site was closed because of the war and the subsequent creation of Poland's pro-Soviet communist government, which fell in 1989.

GM already owns an Opel plant in the southern city of Gliwice, which produces its Astra and Zafira range.

In 2005, UkrAvto bought the communist-era FSO plant from the troubled South Korean group Daewoo, which had owned the site for 10 years.

UkrAvto has continued making the compact Daewoo Lanos at the FSO sites and sells 95 percent of its production in Ukraine.

GM took over Daewoo Motor in 2002 but Daewoo-FSO was not part of the assets of the South Korean group which were acquired by the US auto giant.

GM and UkrAvto said in a statement Tuesday that they were planning to set up a joint company to run the FSO plant and oversee production of the Chevrolet Aveo.

UkrAvto will hold a 60 percent stake in the company and the rest will be owned by GM's South Korean unit, GM Daewoo, they said.

Production of the Aveo in the EU will help GM meet rising demand for the car.

Wayne Brannon, head of Chevrolet Europe, said 79,000 Aveos have been registered in the EU since the beginning of the year and that the company expects 40,000 more to be on the road by the end of December.

But GM and UkrAvto's production plans could fall foul of the European Commission.

Because public funds have been used in the past to keep the FSO plant afloat, Brussels has set a production cap of 150,000 vehicles a year until 2011, to stop the legacy of state aid skewing the car market.

FSO, backed by the Polish government, has contested the ruling, arguing that the aid was paid out before Poland joined the EU in 2004 and so does not breach the competition rules of the 27-country bloc.

Source: rawstory.com