Japan's car makers to keep Indonesian assembly operations

Japan's car makers to keep Indonesian assembly operations

JAKARTA (JP): Japan's automotive manufacturers said on
Wednesday that they would maintain the operation of their
assembly facilities here despite the recent removal of tax breaks
given to vehicles with high local content.

Hiroyuki Nakamura, deputy general manager of the Japan
Automobile Manufacturers Association, Inc. (JAMA), said
maintaining the existing assembly facilities would make their
cars more competitive.

Nakamura said Japanese car manufacturers mostly believed that
improving the local content was still necessary in order to cut
production costs.

He said the local content of Japanese cars assembled in the
United States and the United Kingdom reached about 75 percent and
80 percent respectively although the countries did not provide
incentives for cars with high local content.

"I believe that Japanese automakers will continue their
existing investments in Indonesia here despite the removal of
incentives for local content.

"But I don't know about new investments because it will depend
on each manufacturers' policy, and most of the Japanese
manufacturers are still studying Indonesia's new automotive
policy," he said at a media briefing.

Nakamura said Japan's automotive manufacturers believed the
future of the Indonesian car market remained bullish despite the
current sluggishness of it.

"Sales are down, not because of the auto industry itself; it
is political. If the country's political condition improves, car
sales will improve," he said, adding that Indonesia was a big
market for Japanese cars.

"The auto industry is facing a very tough period but I believe
Japanese automakers have a very strong presence here and they
will never pull out," Nakamura said.

Nakamura said the Japanese-based parent companies were still
committed to providing fresh capital or loans to support their
Indonesian subsidiaries cope with the crisis.

In November last year, Daihatsu raised its stake in its
Indonesian joint venture to 50 percent, in order to support the
quest for higher quality and more competitive costs.

Nissan Diesel is currently studying the feasibility to
increase its capital and to adopt direct financing for its
Indonesian venture.

Nakamura said Japanese car producers had arranged a number of
approaches to help local operations, such as shifting the market
to overseas and improving the workers' productivity.

Shinichiro Oka, JAMA's manager of the international division,
said Japanese-based carmakers would also raise exports of their
completely built-up vehicles or auto part products from Indonesia
to offset the sharp drop in domestic sales.

The Indonesian-made Daihatsu Hijet van, which has been sold in
China and Vietnam since 1996, was now exported to neighboring
countries, he said. In 1998, the company had exported 79 units of
Indonesian-made completely built-up (CBU) vans, 280 units of
completely knocked-down (CKD) vans and 620 sets of body parts.

Daihatsu planned to export 100 units of completely built-up
Indonesian-made Hijet vans and 1,800 sets of body parts to
Malaysia this year.

Toyota plans to export 21,285 units of a gasoline engine type
of its popular Kijang van to Japan, an increase from 11,225 units
exported last year. Last year, Toyota's Indonesian affiliates
exported 8,064 units of locally made Kijang to Brunei, islands in
the South Pacific, Malaysia and the Philippines.

Isuzu is in progress of exporting its Indonesian-made cast
parts and diesel engines to the Philippines and Thailand, and its
transmission cases to the Philippines, Oka said.

Mitsubishi here has exported its Kuda dynamic family wagon to
Brunei, FE trucks to Bangladesh and Colt T120SS to Tonga and
Solomon Islands. The company also exports sheet panels and
machine parts to the Philippines, pickup truck disc brakes to
Thailand, and connecting rods and cylinder heads to Japan.

When asked if parent companies of Japanese-based carmakers
would eventually buy out their local partners' shares while the
companies' value was currently much lower, Nakamura answered the
auto industry in his country was based on cooperation.

"They're not money-oriented businesses. It's difficult to gain
profit in a short term because they have a long-term view," he
said.

Japan has one of the world's strongest car manufacturing
industries, with an annual production reaching 10 million
vehicles.

The country's carmakers with partnership operations in
Indonesia are Daihatsu, Hino, Honda, Isuzu, Mazda, Mitsubishi,
Nissan and Nissan Diesel, Suzuki and Toyota.

Partnerships are in the form of joint ventures, technical
assistance and production contracts. (gis)