Mercedes-Benz to stay in Indonesia despite crisis

Mercedes-Benz to stay in Indonesia despite crisis

JAKARTA (JP): German carmaker Mercedes-Benz plans to keep its
Indonesian operation despite the expected more than 80 percent
drop in sales this year, the company has said.

Mercedes-Benz Group of Indonesia president, Frank Messer, said
over the weekend the company would likely get capital injection
from its principle in Germany in order to maintain operations
here.

"It may cost a bit of money but we believe not only in the
automotive business here but also in the future of the country,"
Messer said Saturday.

He said the company expected domestic passenger car sales to
drop to 600 cars this year from 3,366 last year.

The company's sales of its trucks would also drop to about 200
this year from 800 last year, while bus sales would likely be no
more than 30, compared to 1,110 last year, he said.

"Like other car producers here, our big problem is that we
can't recover our costs and we can't sell the cars here at the
level they cost," Messer said, adding that by next year, prices
would probably increase.

Messer said Mercedes needed additional capital in order to
continue operations in crisis-hit Indonesia because the turmoil,
which has seen the rupiah's value sink by 80 percent against the
U.S. dollar since mid last year, had dried up its capital.

But loans with high interest rates of up to 70 percent
currently imposed by local banks had made it impossible for the
group to obtain loans from local banks, he said.

"With 70 percent interest rates, the company can really go
bankrupt," he said.

Messer said Mercedes' principle company in Germany had agreed
recently to inject its Indonesian operation with the needed
capital.

He did not specify the amount of the capital but said the
company needed between US$15 million and $30 million in fresh
funds in order to have enough equity to survive for the next two
years.

Messer said the capital injection might change the ownership
composition of its joint venture with the local partner PT Lima
Satria Nirwana (LSM), a company owned by the H.M. Joesoef family.

But he ruled out any immediate plans of acquiring the three
companies under Mercedes-Benz Group of Indonesia: PT German Motor
Manufacturing, PT Star Motors Indonesia, and PT Star Engines
Indonesia from LSM.

"We're still happy with this joint venture. But if, one day,
our partner isn't happy because we face a difficult time and do
not expect to make money in the next few years, so that they sell
their stake in the company, we would be prepared to buy it," he
said.

Lima Satria owns a minority stake in the joint venture.

The company now produces C-180, C-230, C-230K, E230, E320 and
S-230L models of passenger cars in its assembling plants in
Gunung Putri, Bogor, West Java.

Last month, Mercedes began assembling 50 of its latest CLK
model car here.

It also plans to bring to the Indonesian market the new S
class next year, Messer said.

"We decided to always launch the latest model because some
Indonesians like to have the latest model, if they spend so much
money on something," he said.

The company also produces the OH 1518/51, OH 1521/51 and OH
1521/60 buses.

It also produces the MB/MBO 800 truck and bus chassis, the
first Mercedes-Benz product designed and developed here. The
company exports them to Egypt, Vietnam, Nigeria, Peru, Costa
Rica, El Salvador, Turkey, Malaysia and South Africa.

Messer said the company expected to export 1,600 MB 800 models
this year, up from 314 last year.

It plans to increase this to 2,500 next year, he said.

Messer said the company was also looking to export car parts
to Germany.

"For the moment, we are still looking for the parts that we
can produce. Unfortunately, the Indonesian supply industry has
also been hit very hard by the crisis," he said.

Messer said the company had laid off 20 percent of its 1,695
workers in the Bogor plant but planned to keep the remaining 80
percent.

"Of course we don't need that many workers now, but we will
keep them because there's no social network and it's
part of our engagement here in Indonesia," he said. (das)