Economic crisis severely hits car parts producers

JAKARTA (JP): Auto parts producers have been the worst hit by the economic crisis out of all those involved in the country's automotive industry, according to an industry executive.

The chairman of the Association of the Indonesian Automotive Industries (Gaikindo), Herman Latief, said on Wednesday that many of the first-line suppliers of auto parts had started to "one by one collapse".

"As the incomes of the mostly small and medium-scale companies have stopped for months, their stamina is bound to break," Herman told reporters.

The first-line car parts manufacturers were at the top of the car industry's production stream, he said.

They produce small parts to car assemblers as well as makers of larger car components.

Latief did not say how many companies had actually stopped production, but the automotive industry has been dormant since the rupiah's 80 percent drop against the U.S. dollar since mid last year.

Authorized automotive distributors (ATPM) currently no longer produce and assemble cars, as sales have declined by about 85 percent since last year.

The effect of the drastic sales slump had extended to the whole industry, but hit the upstream sectors the hardest, Herman said.

"Most of the ATPM, assemblers, and makers of major components are still operating, although they practically produce nothing now," he said.

This inactivity is threatening the jobs of some 300,000 workers, including those working on vehicle assembly lines, spare parts manufacturer, and vendors, he said.

Latief said the government's plan to lift the import tax and value-added tax (VAT) on car spare parts would contribute very little to the recovery of the crippled industry.

The price of spare parts had risen more than four times since the monetary crisis started last year, and although the producers had increased their prices, they were still losing money, he said.

"Spare parts prices would remain very expensive even with a 35 percent tax cut," he said.

Minister of Industry and Trade Rahardi Ramelan said on Tuesday the government was mulling slashing the 25 percent import tax and 10 percent VAT on spare parts to ease the pressures on the automotive industry and the transportation sector.

Gaikindo has reported that total sales in August rose to 5,110 vehicles from 4.966 in July. This was a considerable rise on the 2,076 vehicles sold in June after the May's riots.

The sales of domestic commercial vehicles fell to 3,464 in August from 4,109 the previous month, while passengers cars increased to 1,614 from 849 in July. Exports of cars also rose to 32 in August from eight in the prior month.

Herman said thriving markets in several areas beyond Java such as Sulawesi and Sumatra, which are currently prospering from exports of agriculture products, helped boost the sales figures, particularly those of commercial vehicles.

However, he said he could not predict how long the situation would persist for those markets.

Car analyst Suhari Sargo said the sales increase generated from those markets was temporary and incidental.

"The companies can only manage to stay afloat in the market and provide services to existing customers," Suhari said.

Gaikindo and a group of journalists is scheduled to conduct a seminar on Oct. 8 at the Ministry of Industry and Trade office, to discuss the present state of the domestic automotive industry.

The seminar will be opened by Rahardi, and will include a range of speakers from the industry and economist Faisal Basri.

They are Herman, PT Astra International president Rini Soewandi, PT Timor Putra Nasional president Moedjiono and the chairman of the Indonesian Association of Automotive Parts and Component Industries, Achmad Safiun. (das)