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)