By Pawel Kozlowski
WARSAW, Sept 29 (Reuters) - The owners of Polish carmaker Daewoo-FSO took new steps to stave off bankruptcy on Monday by approving a large debt-for-equity swap and deep job cuts.
The plan gives the Warsaw-based plant much-needed breathing space after two years of plunging sales, and allows it to resume its search for a new strategic partner.
Daewoo-FSO, once a jewel in the sprawling global empire built up by South Korea's Daewoo Motor Co, was left out in the cold when General Motors Corp agreed to take control of the bankrupt parent's main Asian operations last year.
Daewoo Motor will get new shares in Daewoo-FSO in exchange for writing off nearly two billion zlotys ($502 million) of the Polish company's debt. The move was a condition of Daewoo-FSO's earlier debt restructuring deal with Polish banks.
Daewoo Motor holds 89 percent in the plant, the Polish state has nine percent, and the rest belongs to its employees.
"We no longer have a knife at our throat. The spectre of bankruptcy has hovered over us for the last two years, and now we can step up our attempts to find a new partner," Daewoo-FSO spokeswoman Krystyna Danilczyk told Reuters.
Britain's MG Rover has long been interested in taking control of the ailing manufacturer to acquire low-cost production facilities in central Europe but tough talks with Daewoo-FSO's creditors have blocked various proposals.
Rover said on Monday that it still saw the Polish plant as "an interesting investment opportunity" but declined to comment on the outcome of the shareholders' meeting.
Shareholders also agreed to shed up to 1,480 jobs, or nearly half the current workforce, after sales halved year on year to a meagre 5,300 cars in the first six months of this year.
"We understand that job cuts are unavoidable. But it remains to be seen precisely how many jobs will be lost, as a lot will depend on our future expansion plans," said Marek Dyzakowski, chairman of the Engineers and Technicians Trade Union.
Earlier this month six Polish banks agreed to write off half of their combined 600 million zloty debt on condition that the Korean parent company agreed to convert its own liabilities.
Daewoo-FSO, saddled with 4.0 billion zlotys of debt, now makes Daewoo Matiz and Lanos vehicles and is seeking to extend its licence beyond the current October 2004 expiration date.
Under the previous rescue plan, Rover had negotiated to take a stake in a production unit to be spun off from Daewoo-FSO in exchange for cash investment, but local banks blocked the plan.
Daewoo-FSO is one of Poland's three car producers. Its two local rivals -- Italy's Fiat and GM's Opel -- have seen their sales rebound this year thanks to an economic recovery and falling interest rates.