Astra, Honda Motors set up joint venture

JAKARTA (JP): Publicly listed PT Astra International and Japan-based Honda Motors Corp. Ltd. announced on Wednesday the establishment of a joint venture in a bid to boost the two companies' motorcycle production.

Speaking at a media conference, Astra president Theodore Permadi Rachmat said the two companies' existing joint ventures -- PT Honda Federal and PT Federal Motor -- would be merged into the new joint venture, called PT Astra Honda Motor.

"(The joint venture) will integrate the two organizations' existing motorcycle operations in Indonesia and will start operating by January 2001," Rachmat said.

Honda Motor president Hiroyuki Yoshino said he expected the new joint venture would be developed as a production base for Honda motorcycles to be sold in the region.

"With the integration of our motorcycle operations in Indonesia, we aim to enhance our competitiveness through closer coordination with the Honda network in the ASEAN region," he said. ASEAN groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam

According to him, Indonesia will regain its position as the world's third largest motorcycle market.

Data from Astra shows Indonesia's domestic sales of motorcycle this year recorded the most rapid growth in ASEAN.

As of July total motorcycle sales in Indonesia reached 431,000 units, an increase of over 101 percent over the same period last year. Honda motorcycles made up 54.1 percent of these sales, or some 233,000 units.

Yoshino said his company had dominated the Indonesian motorcycle market for years, with a market share of about 50 percent.

Honda Motor senior managing director Katsuro Suzuki said the company would spend about Rp 1.28 trillion to increase its stake in the new joint venture.

He said the company currently owns a 55 percent stake in Honda Federal, which produces spare parts for Honda motorcycles.

The remaining 45 percent is owned by Federal Motor, Honda's assembly and distribution company.

Astra owns 92.5 percent of Federal Motor, with the remaining 7.5 percent owned by PT Prakarti Yoga.

Under the deal, Astra sold a 42.5 percent share in PT Federal Motor to Honda, Rachmat said. Honda will pay Rp 1.28 trillion, of which Rp 1.12 trillion will go to Astra and the remainder to Prakarti Yoga, which holds 7.5 percent of Federal Motor, Rachmat said.

Astra will use the funds to pay its debts, which currently total around US$1 billion.

Suzuki said Honda Federal's assets were too small compared to Federal Motors, so that in order to become equal partners in the new joint venture, Honda Motors must invest another Rp 1.28 trillion. (bkm)