Local automotive component producers face huge losses

JAKARTA (JP): A slump in the country's car market has caused domestic automotive component producers to regret their more than Rp 30 trillion (some US$3.4 billion) accumulated investment in the industry over the last three years.

Such a large investment was based on the then rosy outlook for the automotive market, the president of the Indonesian Automotive Parts and Components Industries Association, Achmad Saifun, said during the inauguration of state-owned surveying company Sucofindo's new president on Wednesday.

"In 1997 we predicted 750,000 cars could be absorbed by the domestic car market in 2000, but the country's economic crisis has not made this possible," Safiun said.

He said that most of the association's members could suffer large losses from their investments because their facilities could not operate to full capacity in the sluggish market.

In 1998, the car sales were expected to fall by 85 percent from 366,435 cars 1997 as the crisis bited deeper in the economy.

The government's ambitious national car program inspired the domestic automotive parts and components industry to increase its investment significantly.

The program, while promising brighter prospects for the domestic car industry, showed favoritism by awarding special treatment to PT Timor Putra Nasional's Timor sedan.

Saifun said some of the association members suffered losses when Timor Putra, one of their main partners, defaulted on its contracts.

"We are in a crisis and the status of the Timor project is unclear... this is called a business risk," he said.

The government gave PT Timor Putra Nasional in 1996 the sole right to develop the controversial national car program. This preferential treatment was lifted following the enforcement of sanctions imposed by the World Trade Organization on Indonesia because of the program.

The national car program, which won wide support from both the government and the automotive industry, has been under pressure following the resignation of president Soeharto in May last year.

Timor Putra, owned by Soeharto's youngest son Hutomo (Tommy) Mandala Putra, is now required to pay Rp 1.9 trillion ($218 million) in unpaid import tariffs because the company did not meet requirements imposed on it as the only producer of the so- called national car.

The customs office on Tuesday last week issued a final warning letter giving Timor Putra 48 hours to pay the tariffs.

Muhammad Zein, a senior official at the customs office, said on Wednesday that his office soon would seize Timor's assets because the company did not meet the deadline.

During the inauguration ceremony at Sucofindo's office in South Jakarta, Didie Tedjosumirat, former operations director at the company, was installed as the new president. Also, Soeminto Tabri, former head of work safety and health at the company, assumed the position of operations director.

Sucofindo, which now focuses on international standard quality certification, booked operating incomes of Rp 416 billion, Rp 621 billion and Rp 670 billion in 1996, 1997 and 1998 respectively, Didie told reporters.

"We hope to make Rp 650 billion this year by focusing more on the business of international standard quality certification for firms in the natural resources industry," he added. (02)