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)