Australia's Orbital strengthened by Indonesia deal
Australia's Orbital strengthened by Indonesia deal
SYDNEY (Reuter): Orbital Engine Corp Ltd said yesterday the planned supply of its combustion process engine to power the planned Indonesian national car was "a pot of gold" and the largest deal in the company's history.
"On the Indonesian front it certainly is high volume production in the automotive market, a pot of gold at the end of the rainbow for Orbital," Orbital investor relations officer Steve Hill told Reuters from Chicago.
"It is really the first time the market has seen of any high volume motor vehicles deals with Orbital technology," Hill said.
On Thursday, Orbital said in an announcement to the New York Stock Exchange that its Orbital Combustion Process Engine had been selected by an Indonesian government group for use in the Maleo car project.
Hill said he could not comment on revenue forecasts from the deal. But Orbital said in the announcement it would receive royalties for each engine used, and from engineering support.
Hill said the company was in talks with other groups about using the Orbital technology in cars.
Until the Indonesian deal, Orbital's engines had mainly being used in outboard motors on boats.
Orbital shares hit a two-month high yesterday after the Maleo car deal announcement. At 3.50 p.m. (05:50 GMT), Orbital shares were 13 cents or 12.74 percent higher at A$1.15.
"There are some extremely exciting discussions taking place in other markets, not just in Asia, although they are happening in Asia as well but also Europe and North America on automotive four-stroke engines as well as two-stroke engines," Hill said.
Hill said Orbital Engine was in talks with 10 manufacturers currently about using the company's directly injected four-stroke and automotive two-stroke engines.
The Maleo car project is the brainchild of Indonesia's State Minister of Research and Technology B.J. Habibie, and is separate to another Indonesian national car project -- the Timor car.
Indonesia production of the Maleo has been set for 1998, with a target production of more than 100,000 units.
Orbital had been working with the Indonesian government and the Maleo engineering team since mid-1995.
"Negotiations are at an advanced stage to establish a consortium between Orbital and its Indonesian partners to mass produce the engine for Maleo in Indonesia," Orbital said in the statement to the New York Stock Exchange.
Hill said he and Orbital's chief executive Kim Schlunke were in Chicago to attend the International Marine Motors Exhibiters Congress there. He said Orbital executives would also be traveling to Detroit, the United States car making capital.
He said two new outboard engines had been unveiled at the Chicago exhibition by Mercury Marines, a unit of U.S. marine product maker Brunswick Corp.
The Orbital engine was invented around 1969 by Ralph Sarich and in 1972 the technology was backed by Australia's largest company The Broken Hill Pty Co Ltd, which now holds around 25 percent of the Perth-based company.
However, Sarich fully sold out of Orbital last year and no longer has any association with the company that markets his engine design.
Despite the healthy rise in Orbital's shares price yesterday they are a long way short of the record of A$5.37 hit in November 1991.