Search the Internet          Tips  Sites: Finance, Investment

Daewoo India says operations valuable for any buyer

The head of the Indian unit of troubled South Korean carmaker Daewoo Motor said on Wednesday he expected any suitor for its parent firm to be interested in its Indian operations.

"This facility is most valuable for the future because it can make engines," Young-Tae Cho, managing director of Daewoo Motors India Ltd, told reporters at the company's plant on the outskirts of Delhi.

"It is not there in Poland, not anywhere and we can make cars that are Euro III compliant," Cho said.

India and China are markets with great potential, he added.

DMIL's car sales have slid since November because of worries over its future following news of its parent's bankruptcy and whether a buyer, most likely US automaker General Motors, would be interested in several of the firm's overseas operations.

Daewoo India makes the Matiz, its popular premium small car, and the mid-sized Nexia and Cielo models and sources parts for the Matiz from its Korean parent.

A little over 20 per cent of the Matiz's components and about five per cent of the Cielo's are sourced from Korea.

DMIL is India's fourth-largest car firm with a market share of 7.4 per cent in the year to March, selling 42,960 cars, figures from the Society of Indian Automobile Manufacturers, show.

Cho who took over as the managing director from Young-Chang Kim earlier this month following his resignation due to ill-health said he saw no threat to the Indian operations since its cashflows were positive and it routinely carried over three months of knockdown kits in inventories.

He said the company will launch a limited edition of the Matiz in July with a new-look grill and in several new colours to help boost sales as well as increase prices by two to three per cent in the northern and eastern Indian markets early next month.

Held 91.6 per cent by its Korean parent, Daewoo India's net loss widened to Rs 3.404 billion in 2000-01 (April-March) on gross sales of 11.844 billion. It had losses of Rs 1.161 billion on gross sales of 12.779 billion a year earlier.

Its poorly performing engine and gear-box division, that has the potential to make 300,000 engines and transmission units, contributed nearly 75 per cent of its losses due to low capacity utilisation.

STUDYING NEW CAR LAUNCHES

Cho said the company's plans to launch the Magnus, Nubira II and Lanos II models in the mid-sized car market later in 2001 was being studied and a production plan would be announced shortly.

Import of these models in completely built form from Korea seemed unlikely now after India increased effective import duty on new cars to 119.65 per cent from 85.33 per cent.

Cho said he would also study the restructuring plan initiated by his predecessor and had already received positive feedback from Indian financial institutions regarding restructuring debt.

His predecessor had said in April that DMIL was pushing to reschedule repayment of its $198 million debt owed to Indian lenders as part of a restructuring programme.

The restructuring involves the spinning off of its engine and gear-box unit into a subsidiary and its subsequent part or full sale. This was crucial to pushing the company into profits from its passenger car operations in 2002-03.

Daewoo is also aiming to save Rs 850 million in costs this year.

Tell us what you think of this report