Japan's car projects in Indonesia remain on hold

Japan's car projects in Indonesia remain on hold

TOKYO (Reuters): With Indonesia mired in political and
economic turmoil, Japanese carmakers that have invested heavily
there are halting plants and projects, worried that a recovery
may prove increasingly elusive.

Big carmakers such as Nissan Motor Co and Mitsubishi Motors
Corp said yesterday that automotive projects planned for
Indonesia remained on hold and could be delayed further by
political instability.

Even bigger worries loomed, analysts said, for Japanese
companies that had already completed plants in Indonesia, only to
slash production and then shut down entirely as economic crisis
degenerated into political turmoil.

"If there is further turmoil, a recovery could be delayed,"
said a spokesman for Mitsubishi Motors, the top Japanese company
in Indonesia's commercial vehicle market. "Right now it is
impossible to tell how the situation will develop."

He said a plan to start producing Mitsubishi multipurpose
vehicles in Indonesia this September remained on hold due to the
economic and political situation.

A Nissan spokeswoman also said on Tuesday that plans for a
joint company to build an 8.5 billion yen gasoline engine
assembly plant in Indonesia had been suspended.

"We will watch developments in Indonesia before we decide what
to do about the plan to build a factory there," she said.

The Indonesian government in December approved the formation
of a joint company, although plans to set up the company in
January and start construction of the plant in April were delayed
due to the country's economic slump, she said.

Analysts said, however, that the major Japanese automotive
projects on the drawing board for Indonesia had already been
completed by early this year, after Japan's carmakers speeded up
investment schedules in response to the launch of Indonesia's
national car, the Timor.

The latest turmoil means that those projects face an
increasingly bleak future.

"They (Japanese carmakers) had expected things to be bad, but
they've become even worse. I think that's probably a source of
worry," said Mitsubishi Research Institute analyst Ryuichiro
Inoue.

More than 500 people were killed in riots last week as
Indonesia faced its worst political violence in three years.

President Soeharto on Tuesday promised new elections and said
he did not want to be nominated as president again. But he said
he would stay in power to supervise the process of reform and
gave no indication of when the elections would be held.

PT Toyota Astra Motor, a joint venture owned 49 percent by
Toyota Motor Corp , the top-selling brand in Indonesia, and 51
percent by PT Astra International , halted output last Thursday
as political unrest brought the economy to a standstill.

A Toyota spokesman said the shutdown would continue until
Wednesday and could be extended.

Toyota Astra had just started up a second car assembly plant
in February, lifting the venture's total production capacity to
130,000 vehicles per year.

Output had been cut by more than half due to Indonesia's
financial crisis, however, with Astra sales down more than two-
thirds in the past three months from year-ago levels.

A spokesman for Isuzu Motors Ltd , which owns 12.5 percent of
commercial vehicle maker PT Pantja Motor, a joint venture with
the Astra group, said output was halted and would be resumed when
stability returned to the country.

He added, however, that the venture had already cut output by
more than half. Prior to the economic downturn it had been
producing about 40,000 multi-purpose vehicles per year.