Hyundai Motor shelves auto project in RI

Hyundai Motor shelves auto project in RI

SEOUL (AFP): South Korea's largest automaker, Hyundai Motor Co., yesterday shelved a major joint-venture in Indonesia "temporarily," citing financing problems, and said it may have to pull out altogether.

"We have decided to shelve the 400 million dollar project in Indonesia because of high investment costs," said a spokesman for the company.

"We are considering completely withdrawing from the joint- venture if things do not improve by April," another Hyudai official said.

The project with PT Bimantara Citra, to produce 100,000 cars annually, will be shelved until April when Indonesia completes negotiations on reducing tariffs on imported cars, he said.

The temporary suspension, decided upon by Hyundai Group directors, was a major setback in Hyundai's ambitious plan to set up a car production network in Asia.

"It was needed for us to survive in an IMF bailout program," he said. "But our overseas production in Malaysia, Turkey and India will not be affected."

He said Hyundai would resume its project in Indonesia "if the situation returns to normal," acknowledging the group was also troubled by South Korea's prolonged financial crisis.

"Both Hundai and Bimantara have problems in financing following the sharp depreciation of their currencies," he said.

Indonesia has agreed to reduce high tariffs now ranging at 200 percent on imported cars in return for a bailout from the International Monetary Fund (IMF).

"The project will be restored only if Indonesia decides to maintain the current 200 percent tariffs on imported cars," the spokesman said, indicating the project could be shelved permanently.

Bimantara and Hyundai in June began building the joint-venture plant to produce Avante and Accent models from 1999.

"With the current high investment costs, we cannot make any profits there. We had to shelve the plan until April," the second official said.

But he said the company's existing joint-venture plant with Bimantara, which was launched in 1995 and now produces 10,000 Accent models annually, would be kept alive.

"Indonesia is an important market in Southeast Asia. We do not want to lose our stronghold completely there," the Hyundai Motor spokesman said.

Since South Korea agreed last month to accept rescue funds from the IMF, Hyundai has launched a down-sizing program by reducing costs and cutting back on next year's investment.

"Everything is now shaky. So we cannot but restructure our overseas auto production. For a while, we will try to boost production here for exports to avoid forex losses," he said.