Indonesian car industry may go bankrupt

Indonesian car industry may go bankrupt

JAKARTA (JP): Indonesia's automobile industry is now on the
verge of bankruptcy due to the double blows from the sharp rupiah
depreciation and the credit crunch, Herman Z. Latief, Chairman of
the industry's association said yesterday.

Latief told newsmen the credit crunch, the bleak outlook of
most businesses and the steep increase in the prices of imported
goods were driving the car industry into bankruptcy.

"Car sales this year are estimated to fall sharply. But the
worst may still come next year when the full impact of the
financial crisis begins to hit the industry," Latief added.

Car industry analyst Suhari Sargo agreed that the auto
industry has severely been hit by the currency turmoil due to its
heavy dependence on imported materials and components and on
credit sales.

In Tokyo, an industry leader said yesterday car sales in
Southeast Asian countries, battered by currency and economic
crises, are expected to recover in about two years, an industry
leader said here yesterday.

"I feel optimistic about the future of the economic situation
and automotive business, locally and regionally," said Ninnart
Chairapinyo, president of the Association of Southeast Asian
Nations (ASEAN) Automotive Federation.

The federation groups car makers from Indonesia, Malaysia, the
Philippines, Singapore, Thailand and Vietnam.

Citing examples in past currency crises, including a
devaluation of baht in 1984, Ninnart said he expected the car
markets in the ASEAN would "take two years to recover."

Ninnart, a Thai who is also an executive of Toyota Motor
Thailand, said automobile sales in his country this year would
plunge to 360,000 units from 589,000 in 1996.

The decline was causing over-capacity in a country that can
assemble 800, 000 cars a year, he said.

As a result, "every car maker in Thailand is trying to find
export markets, " Ninnart said.

He estimated that Thai's vehicle exports this year would total
around 40, 000 units, up from the previous year's 15,000 units,
mainly due to export drives by two Japanese firms producing cars
in Thailand -- Mitsubishi Motors Corp. and Toyota Motor Corp.

Ninnart said Toyota officials he met during his current visit
had given "a good response" to his request to promote exports
from Thailand.

Despite growing exports, partially backed by a lower baht,
Ninnart said the overall effect of the currency crisis was
"negative."

Among the problems facing the region's car makers is the issue
of redundant workers, and companies may have to take such
measures as salary cuts or lay-offs, he said.

He said the recovery in the region's auto market was expected
to develop in line with the recovery in the overall economy, but
growth in the sector would be fairly slow.

"I don't believe, after recovery, the auto market will grow as
fast as it has in the past decade."

On the latest fad of clean cars being promoted by Japanese car
makers, Ninnart said it would be premature for the ASEAN region.

"We don't have enough power source for electric cars, and
electric cars are still far more expensive than conventional
cars," he said. (vin)