General Motors stands firm on national car dispute

By John Aglionby

UNITED STATES automotive giant General Motors looks set to keep all new models out of Indonesia until the dispute over the country's national car policy is resolved.

William Botwick, the president director of the company's Indonesian arm, PT General Motors Buana Indonesia (GMBI), this week gave the clearest sign yet that there would be no premature end to the "temporary" freeze on investment.

Last month GMBI said it would announce by the end of August when it would renew its investment.

Now Botwick is not even prepared to say when an announcement might be forthcoming.

"It's hard to say (when we'll renew our investment) because there are a lot of factors that are affecting the timing that are out of our control," he said.

"We primarily want to have a higher degree of confidence of what the outcome of the national car issue will be."

In February last year the government announced out of the blue that a company run by President Soeharto's youngest son, Hutomo Mandala Putra, would be given sole rights to develop a national car.

This included not having to pay import duty or luxury sales tax, measures that practically double the cost of cars here.

Japan, the United States and the European Union reacted by taking the preferential policy to the World Trade Organization (WTO). Their complaint is presently waiting to be heard by a disputes arbitration panel.

Industry analysts predict that Indonesia will lose at the WTO and will have to make concessions, if not actually scrap the policy.

Botwick said that GM's investment freeze was designed to send a clear message to the government.

"The national car issue has had a chilling effect on investment because if the government is going to have such abrupt changes in policy it makes it, for foreign investors, rather difficult to know what to do. What we want is consistency."

The other big factor in GM's decision is the precarious state of the economy and the future value of the rupiah.

In the past six weeks the currency has plunged about 30 percent and then recovered half its losses, thanks to the government intervening and hiking interests to an artificially high level.

"It'll take a bit more time to assess the impact of what's going on in the economy right now, but we're watching it very closely," Botwick said.

All automotive producers have been affected and on Monday GMBI is following the lead taken by Astra and Indomobil and hiking its prices, although a few individual vehicles will still be at old prices and available under old, more generous, credit plans.

That GMBI's investment freeze is likely to continue for months not weeks is shown by Botwick's reluctance to discuss possible new products.

"We're still looking at some other products to supplement the Blazer in our lineup," he said.

But when asked about the four-wheeled drive Frontera he would only say: "It's one of the products that might be interesting here."

In the past he has said that it would definitely be coming.

The VT Commodore has been launched successfully in Australia and there has been talk there that it might be introduced up here but Botwick squashed that idea.

"It won't happen in the near future. I think they're going to be capacity constrained in Australia. We don't have any current plans to introduce it."

And he also said nothing that happens at the Frankfurt Motor Show next month would have any bearing on the Indonesian market.

This rules out the new Astra, which is starting to pick up sales in India and would be keen competition for many of the mid- sized sedans here.

But this negativity does not mean that Botwick considers GM's presence in Indonesia a mistake or waste of resources.

"I think it's a critical market," he said.

"If you have a strategy for Asia you have to have a strategy for Indonesia and in a market like this there are going to be some bumps on the road, sometimes big bumps, and you have to have the long-term vision and the patience to get by them and make course adjustments.

"If there had not been the national car issue, there probably would have been something else; it's just the nature of doing business in a market like this.

"We've never said we're leaving, we just want to be able to grow our business and sustain it on a long-term basis."