Volvo to review its Indonesian operation

By Devi M. Asmarani

GTEBORG, Sweden (JP): International automobile manufacturer Volvo Car Corporation is reviewing its operation in Indonesia due to the current economic and political uncertainty, the company's executive has said.

The president of Volvo Car Asia Pacific Ltd, Jan-Olof Nilsson, said here last week that the firm was evaluating its partnership with Indonesia's PT Indomobil Sukses International and would be ready to announce its next step in the crisis-hit country in three months.

"The road map in Indonesia has completely changed, we have to navigate a new path," the Singapore-based Nilsson told The Jakarta Post after a test drive of Volvo's latest sedan model, the S80, for the international press.

"Basically, all car manufacturing companies are waiting to see what they can do to help their businesses survive in Indonesia," he said.

Indomobil is the sole authorized assembler and distributor of Volvo cars in the country.

But Nilsson dismissed the suggestion that cooperating with Indomobil, a subsidiary of the country's largest conglomerate, the giant Salim Group, was politically risky.

"When we work with a partner we never take political issues into consideration, our partnerships are always completely professional," he said.

"What we have to do now is sit together and reason, and go about our business in Indonesia," he added.

The diversified Salim Group was founded and is controlled by Liem Sioe Liong, a long-time ally of former president Soeharto, who stepped down in May following massive pressure for his resignation.

Within a month of Soeharto's resignation, Bank Central Asia, the country's largest private bank which is owned by the Salim Group, was taken under government management after a massive run on deposits dried up its reserves.

"The situation regarding political and economic stability is very different from one year ago," Nilsson said.

But he said Volvo was upbeat about its long-term prospects in Indonesia.

Indonesia remained an important market for the company because a fairly strong customer base of approximately 6,000 buyers had been built up, he said.

"Our priority is to take care of these existing 6,000 Volvo customers," Nilsson said.

Asked whether Volvo would eventually sell the S80 model in Indonesia, Nilsson said it would depend on the company's revised strategy on Indonesia.

"It is connected to our overall approach to Indonesia," he said.

If Volvo did decide to market the sedan in the country it would take quite a long time to set up an assembly facility, he said.

Volvo assembles automobiles from imported components in Thailand, Malaysia, the Philippines and Indonesia, but ships completely assembled units to Singapore, Hong Kong, Taiwan, Brunei and Korea.

The vice president of Volvo Car Asia Pacific, Jack Dirkx, who represents Indonesia office, said the company normally produced 700 units a year in the country. The company has an annual global output of 400,000 units.

He said the Southeast Asian market excluding Japan made up 5 percent of Volvo's global market.

A plunge of over 70 percent in domestic automobile sales has forced most manufacturers in Indonesia to stop or cut production drastically this year.

The Volvo Car Corporation is the largest company within Volvo and accounts for 50 percent of the group's total sales.

Most of the companies research and development takes place in Sweden, but production is spread across Sweden, Belgium, the Netherlands, Canada and parts of Southeast Asia.

The company has recently launched the S80 model, a radical departure from the exterior and interior designs of Volvo's previous sedans.