Astra International plans to produce cheap sedans

Astra International plans to produce cheap sedans

JAKARTA (JP): Publicly-listed automaker PT Astra International
yesterday confirmed that it is preparing to produce cheap sedans
to anticipate tight competition in the free trade era after the
year 2003.

"We have our own long term strategic plan. We have to be
prepared to face tough competition from neighboring countries'
automakers," Astra's finance director, Rini Suwandi, said after
the company's annual shareholders meeting yesterday.

"Therefore, our plan is not a reaction to the establishment of
PT Timor Putra Nasional," she said.

Timor Putra is a company newly-established by President
Soeharto's youngest son Hutomo Mandala Putra. It has been granted
tax incentives by the government to produce national cars with
local content of at least 60 percent by the end of three years of
operations.

Astra's president, Theodore Permadi Rachmat, said that the
company has signed an agreement to establish a design center for
the production of the planned cheap sedans.

The two executives said that it will take time to prepare the
production facilities for the planned cheap sedans.

Rini, however, said that within three years, Astra's cheap
sedans could be launched.

"We will use our own technology for the production of the
cars," Rachmat added.

In a press conference after yesterday's meeting, Rachmat said
his company has revised its target on its automotive division's
contribution to the company's consolidated sales from 80 percent
last year to 75 percent this year, of which 30 percent will
derive from the sales of automotive vehicles, 40 percent from the
sales of motorcycles and 5 percent from the sales of automotive
components.

The contribution of the vehicle sales shows a sharp decline
from approximately 45 percent last year.

"We have revised downwards our estimate on this year's
domestic demand for automotive vehicles from 400,000 units to
about 320,000 but our market share will remain at about 50
percent this year," Rini said. "The revision was made based on a
prediction that potential buyers are waiting for the cheap cars
to be produced by Timor Putra."

"But we are optimistic that the annual domestic demand for
automotive vehicles will reach 600,000 units in 1999," Rachmat
added.

"In such a circumstance, with competition getting fiercer, the
most important thing for us is maintaining the profitability of
our products," he noted.

Rini also confirmed that the company would not be hurt too
much by the new automotive regulation granting tax breaks to
Timor Putra, which will produce only sedans, because most of
Astra's production is commercial vehicles. Sedans usually account
for only 10 percent of its annual output.

A statement from the company acknowledged that the local
contents of its Toyota Kijang commercial vehicles have now
reached 51 percent, Daihatsu Zebra commercial vehicles 45
percent, Daihatsu Feroza multipurpose vehicles 42 percent,
Daihatsu Classy sedans 22 percent and Honda motorcycles 85
percent.

Meanwhile, the local contents of Izuzu commercial vehicles and
Toyota Corolla sedans are 24 percent.

Profits

Rachmat also said yesterday that in 1995, Astra's consolidated
net sales were Rp 12.6 trillion (US$5.35 billion) and its after-
tax profits amounted to Rp 370 billion. The figures indicated an
increase of 32.9 percent and 32.7 percent respectively over the
previous year.

Astra operates in five divisions through 125 subsidiaries.
Last year its automotive division recorded total revenues of Rp 9
trillion (an increase of 29 percent), agribusiness Rp 298 billion
(100 percent), financial services Rp 950 billion (53 percent),
heavy industry Rp 1.7 trillion (30 percent) and other businesses
including electronic equipment Rp 444.5 billion (44 percent).

Astra's consolidated total assets increased from Rp 10
trillion at of the end of 1994 to Rp 15 trillion by last
December, due mainly to the expansion in the number of
consolidated subsidiaries and the increase in the amount of loans
received.

During the first quarter of this year, the company booked Rp
75 billion in net profits, as compared to Rp 92 billion in the
same period of last year.

The sales volume of its automotive vehicles, including those
with the trade marks of Toyota, Daihatsu, Izuzu, BMW, Peugeot and
Nissan, dropped by 9 percent to 40,047 units although its market
share inched up by one percent to 53 percent.

The market share of its motorcycles decreased slightly from 48
percent in the first quarter of last year to 47 percent in the
January-March period of this year, with the sales of 130,030
units, while the total national motorcycle sales rose by 28
percent to 271,009 units.

Commenting on the profit decline, Rachmat said that it was due
mainly to overall market weakness.

At yesterday's meeting, the shareholders also approved a
proposal to pay a dividend of Rp 90 per share, totaling Rp 104
billion. (alo)