Crisis hits Asian automotive industry

Crisis hits Asian automotive industry

KUALA LUMPUR (AFP): Vivien Lam's dream of owning a car was rudely shattered when she was sacked by a law firm in Kuala Lumpur last month amid the country's deepening economic crisis.

Lam was forced to cancel her booking for Malaysia's national car -- a Proton Iswara model -- and hoped that the dealer would refund her 20 percent down payment of nearly 8,000 ringgit (US$1,778).

"There is no way I can afford a car. Interest rates have shot up to 10 percent from 8.5 percent in June, prices of goods have gone up and I am out of a job," moans the 25-year-old. "Life sucks!"

Lam's case exemplified the plight of many cash-strapped Asians, who are now skimping on luxury items and saving for rainy days amid paycuts and a freeze on salary increases.

But the biggest losers are Asia's legions of car producers and motor traders, who are forced to cut production and lay-off thousands of workers as the financial crisis shows no signs of easing immediately.

Auto makers have been turning to export markets to beat declining domestic sales and clear high inventory but that too has been badly hit by the region's economic turmoil.

Vehicle sales in Thailand, Southeast Asia's biggest auto market, plunged 38.4 percent to 363,156 units last year and is projected to dip even further to a mere 240,000 units in 1998.

Japanese auto giant Toyota recently stopped production in its two Thai plants for nearly two months and slashed output after reopening in early January. The company also offered 10,000 baht ($188) worth of government bonds for buyers of its Corolla model.

Two weeks ago, U.S.-based General Motor Corp. said it has decided to slash investment in its new car assembly plant in Thailand by one-third to $500 million and delayed the opening of the plant due early next year.

South Korea's auto-industry posted its first ever contraction in total sales for 1997 to 2.83 million cars, down by 20,000 units from a year earlier amid sluggish demand at home.

A Korea Automobile Manufacturers Association spokesman predicted further fall in sales this year because of the austerity program prescribed by the International Monetary Fund.

South Korean auto producers have also appealed for government help to rescue their troubled industry since Mando Machinery, the country's largest auto parts supplier, was declared insolvent in November.

Mando's insolvency followed the collapse of Kia Motors Co., the country's third largest auto-maker, which opened the way for restructuring in the bloated auto industry.

In Kuala Lumpur, vehicle sales rose about 12 percent to 404,837 units in 1997 but are forecast to plummet by a massive 60 percent to 160,000 units this year.

Malaysian Motor Traders Association chairman Aishah Ahmad said traders were "in a state of shock" by the sudden economic downturn.

"There is a loss of consumer confidence and uncertainty," she said.

The industry suffered from steep falls in the ringgit and tighter credit policy which limits funds for vehicle financing, a maximum period of five years for repayment and a maximum 70 percent margin financing.

Aishah said traders had downsized their operations and were considering shutting down assembly plants and repatriating thousands of contract foreign workers to keep their heads above water.

MMTA members, comprising 28 franchise holders and distributors, own 13 assembly plants in the country, each hiring up to 300 foreign workers. They also employ nearly 9,000 Malaysians for distribution and sales.

In Manila, automotive sales are expected to fall by a maximum 40 percent to about 109,000 units this year on the back of the weaker peso and soaring interest rates.

Auto assemblers in Philippines "will be fighting for survival" this year, said a car executive who asked not to be identified. "We will be happy if we can break even this year."

In Jakarta, leading auto maker PT Astra International is projecting 1998 car sales to halve following drastic crashes in the value of the Indonesian rupiah.

Astra's main automotive unit, Toyota Astra Motor, assembles Toyota-made cars and produced about 97,000 units last year.

Meanwhile, Singapore car distributors are offering discounts up to $15,000 even on BMWs during the region's economic crisis to clear inventory amid a drop in demand.