Indomobil says new auto policy could harm output

JAKARTA (JP): Local car producer PT Indomobil Sukses International announced on Wednesday the government's new automobile policy would severely hurt its automotive assembly operation.

Company president Subronto Laras said Indomobil might have to sell its assembly facilities if the government failed to support the company's commitment to improve its automotive manufacturing technology.

"If there is no chance to benefit from manufacturing activities, I will sell our assembly facilities. We might get some profit out of it," he said, adding that the new automobile policy would make being a mere car seller more profitable.

Subronto said he was disappointed with the new policy, which abolished tax breaks tied to the level of local components used in automobile production.

He said Indomobil had invested millions of dollars to build assembly facilities in order to increase its local content.

However, companies which own assembly facilities now receive the same treatment as those companies which merely import vehicles, he said.

The government announced last week a new automotive policy in which import tariffs and luxury taxes on automobiles were restructured, and incentives for vehicles with high local content removed.

Cars with high local content, which previously received tax breaks, are subject to higher import duties and luxury taxes. Imported cars, on the other hand, pay lower import duties.

Soebronto said the new policy would not automatically increase the price of Indomobil's most popular model, the Suzuki Carry van, which has around 50 percent local content.

"It depends on the fluctuation of rupiah against the dollar," he said. Suzuki models account for 65 percent of Indomobil's total sales.

Indomobil reported a consolidated net loss of Rp 717 billion in 1998, compared to a Rp 404 billion net loss in 1997.

The company attributed the loss partly to a significant drop in automobile sales.

Car sales dropped by 85 percent in 1998 to 11,808 units, and motorbike sales fell by 78 percent to 84,406 units.

Soebronto said Indomobil was very active in restructuring its debt.

He said the restructuring program included moving the debts of several of its subsidiaries, including truck manufacturer Hino, from Bank Central Asia, Risjad Salim International and PT Indo Jaya Tata Lestari to the company's stockholder, the Salim family.

The company plans to convert the debts of Indomobil and a number of its subsidiaries to equity through private placement, he said.

Indomobil expects to sell around 10,000 cars and 80,000 motorbikes this year. These figures represent some 20 percent of total estimated domestic car and motorbike sales of 50,000 units and 400,000 units, respectively.(cst)