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Daewoo to reposition Cielo as a taxi, restructure debt

K Giriprakash

Daewoo Motors Ltd's Cielo is all set to take on Hindustan Motors' Ambassador cars on its home turf by repositioning itself as a tourist taxi.

Apart from this new initiative, the troubled South Korean chaebol's Indian subsidiary, is planning to restructure its debt component and increase its equity to over 90 per cent in the company.

A top Daewoo official said as part of its effort to improve the financial health of the company, its total debt will be restructured and converted into equity. This will increase its holding to over 90 per cent. The company now plans to break even during the current fiscal.

The official said Cielo will be repositioned as a tourist vehicle. Its main competition will be Ambassador cars which are widely used as taxis. Daewoo expects to come out with attractive financing options for the tourist operators to bridge the price gap with other cars. "Cielo is being increasingly seen as a replacement by tourist operators because it gives passengers far more comfort drive than existing models which are used as taxis," the official said.

He said with more models being introduced into the market by the company, Cielo's repositioning will help it to sustain its growth. The company has so far sold around 55,000 Cielo cars.

Daewoo Motors embarked on a cost restructuring exercise during 2000 which resulted in the company cutting costs by over Rs 580 million. It hopes to further costs by Rs 850 million by March 2002. Phase two of the restructuring will involve spinning off the engine and gearbox plant into a separate fully owned subsidiary or a separate company. "We have appointed a consultant who is examining the best way to hive it off," he said.

The company official said the division was set up as a global sourcing centre for all Daewoo cars. But its utilisation rate was a mere 10 per cent while its losses amount to over 75 per cent.

The official said Daewoo cars sales have grown by over 30 per cent between April-February 2000-01, while sales have increased to 38,551 cars compared with 29,549 cars during the same period during the previous year. Matiz, its largest selling car, registered around 25 per cent growth between April 2000 and February 2001.

It recently initiated a dealer restructuring programme in seven majors markets and has identified eight dealers as pilots to increase its sales and marketing efforts through upgraded sales systems and service standards.

Daewoo plans to sell around 55,000 cars during the current fiscal and expects to break even in passenger car operations during this period.

Daewoo plans to reach its projected profits of Rs 850 million by 2002-03. It recently launched a road show across the country for Magnus, priced at around Rs 1.5 million, Nubira II with a price tag of around Rs 1 million and Lanos II with a price tag of around Rs 800, 000.

At present, Daewoo has Matiz, priced between Rs 300, 000 and Rs 400, 000; Cielo priced around Rs 500, 000 and Nexia priced around Rs 600, 000. It is also test-marketing Tacuma, a multi-purpose vehicle.

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