Less than three years after acquiring marquee British brand Jaguar Land Rover for a little over $2 billion, Tata Motors has set eyes on yet another European acquisition. The company is understood to be in talks to acquire the Warsaw-based Fabryka Samochodow Osobowych (FSO) car plant. A potential deal would give the company direct access to the Eastern European markets.

Though the exact valuation of the deal could not be ascertained, sources said Tata Motors has set aside $1 billion to make ?small acquisitions? across Europe to power its global ambitions. The acquisition of FSO is going to be funded through this corpus, an industry executive with direct knowledge of the matter told FE.

Known for assembling models for various global carmakers, the Polish firm FSO is controlled by Ukraine?s UkrAvto that enjoys a 19.9% stake, which gives it 84.31% voting rights. The Polish government enjoys a minority stake of 2.69% in the plant. At present, FSO assembles Chevrolet Aveo II units under licence from South Korea?s GM Daewoo, but is due to end production of the model this year.

?The acquisition should be seen strictly from a strategic standpoint.

?Tata Motors? presence in Eastern European markets is low. The acquisition would give the Tatas a ready assembly unit,? a source said. When contacted a Tata Motors spokesperson said, ?Tata Motors does not comment on speculative reports.?

In 2010, the FSO plant dispatched a total of 45,854 vehicles, down 23.19% year-on-year, according to figures from the Polish automotive market research institute Samar. The factory has an annual capacity of 1.5 lakh units.

An industry analyst who did not want to be quoted said cash-strapped auto companies globally were becoming attractive to domestic OEM players. ?Recently Mahindra completed its acquisition of the debt-ridden South Korean firm Ssangyong Motors. These acquisitions have to be seen in the context of growing global ambitions of Indian OEMs that realise that rather than starting operations from scratch in these countries, it makes more business sense to go for strategic acquisitions,? he said.

Earlier, Chinese state-owned Cherry Automobile was also in the fray to acquire the Polish firm, without making any meaningful progress. FSO?s troubles started from September 2008 following the collapse of Lehman Brothers. This was owing to the company?s overdependence on Ukraine and Russia. FSO was forced to downscale production from 149,000 units in 2008 to only 60,000 in 2009.

Since taking charge in early 2010, Tata Motors group CEO Carl-Peter Forster has devised a cutting edge strategy to become a truly global OEM. By the end of the year, the company is planning to debut a total of eight models including Nano, Indica Vista, manza among others, in Europe. Tata will also bring the Nano Europa and Aria to Britain in the next few years.

The FSO plant was set up in 1951 by the government of Poland in Zeran on Warsaw’s eastern bank of the river Vistula responsible for the production of vehicles following the devastating World War II.