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Daewoo to hike Matiz price by 3 per cent

BS Corporate Bureau

Daewoo Motor India Ltd will increase the prices of its small car Matiz by around 2-3 per cent in the northern and eastern markets of the country with effect from July, following a similar exercise in the southern and western regions recently.

A price escalation will not affect Matiz sales which has declined during the recent months as "the product is still competitively priced," company executives said.

The company, according to them, is also working out an alternate plan of financial restructuring after a failed attempt to convert dues (in the form receivable of the auto maker's UK subsidiary) into its equity that was aimed at augmenting the former's working capital needs.

An inter-ministerial FDI regulator in the government as well as the department of economic affairs had turned down the original proposal since it did not conform to existing FDI guidelines. "Debt cannot be converted into equity," it said, while rejecting the application.

Senior officials of Daewoo India on Friday said though "there is no problem of a cash crunch yet, and debt payment plans with financial institutions have been rescheduled, keeping a mid and long-term view of the business, the company is working on an alternate plan which will be presented to the government very soon."

DMIL now has a new chief executive and managing director in Young Tae Cho who replaced YC Kim. Cho said his prime agenda will be to instil confidence in DMIL's employees and the trade that DMIL is not under the threat of closure or that it is not facing any financial crisis. "We are instead close to finalising a deal with General Motor in Korea. If DMIL performs well, it is likely to form part of the business which will be taken over by the US car maker," he said at a press meet in New Delhi.

"Daewoo has invested Rs 450 billion for this country with a long-term perspective. Automobile companies plan for at least 30 years ahead. Tough times come and go. This is all part of the business cycle, particular in relation to the automobile industry. But I am confident we will soon see good times," Cho said.

He also attributed the recent decline in the company's fortunes in India to negative campaigning by competition. "Some of these are just rumours. One should keep in mind that DMIL has one of the best manufacturing line among all Daewoo Motor factories," Cho said.

As part of the restructuring, Cho said the company may look at launching new models of the Matiz in the near future. He said the company was still manufacturing the Cielo and its production has not ceased.

Plans for hiving off the gearbox and engine manufacturing facilities into joint ventures with other firms was also prime in the restructuring drive.

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