Kia's crisis may affect Timor car program, says Saleh Afiff

JAKARTA (JP): The on-going financial crisis within South Korea's Kia Motors Corp, may affect Indonesia's national car program, says Coordinating Minister for Economic and Finance Saleh Afiff.

But auto analyst Suhari Sargo said he was confident Kia would maintain its highly profitable cooperation with program carrier PT Timor Putra Nasional.

Afiff was quoted by Kompas daily as saying in Tokyo early this week that Timor Putra could find it difficult to implement the national car program because of Kia's troubles.

Afiff, who was in Tokyo for the World Bank-sponsored aid meeting on Indonesia, said he had checked the extent of Kia's troubles with the South Korean government, the firm itself and Korean banks.

But Suhari said he saw no threat to the national car program because Kia would maintain its cooperation with Timor.

Moreover, because it was a large corporation, Kia was likely to be bailed out by the government and domestic banks, he said.

The only possible problem could be a change of policy if Kia's ownership ever changed, he said.

But Suhari said Kia would definitely keep to its cooperation with Timor Putra.

"The bottom line in a business is making profit, and Timor's Kia-built car sales have so far been very profitable to them," Suhari said.

South Korea's eighth largest conglomerate and third largest auto maker said earlier its problems would not affect its operations overseas, including two auto projects in Brazil and Indonesia.

"Kia Motors is still lucrative and has no problems. Its project in Indonesia is a promising business to be implemented successfully," South Korean Trade and Industry Minister Lim Chang-Yuel was quoted by AFP as saying.

Kia cooperates with PT Timor Putra Nasional, owned by President Soeharto's youngest son Hutomo Mandala Putra, to build an Indonesian national car called Timor.

The government gives tax and tariff exemptions to import Kia- built cars from South Korea, while Timor builds its car manufacturing plant in Indonesia.

Tax-exempt Timors are sold at a price that is almost half that of its competitors.

Afiff was quoted as saying the crisis "might affect" the government-requested loan package of US$690 million for PT Timor Putra National.

President Soeharto recently asked a consortium of state and private banks to give Timor loans to help build its plant.

Kia Group, which controls Kia Motors, has recently been placed under the protection of creditors under a bank anti-bankruptcy pact after defaulting on mounting debt.

The conglomerate was 9.5 trillion won (US$10.7 billion) in debt, including bank loans and notes at the end of last year, according to AP.

The South Korean government had extend 30 billion won in emergency loans to the group to overcome cash-flow problems.

The group, in a self-rescue attempt, disposed of 14 of its 38 subsidiaries through mergers and sell-offs. (das/rid)