GM Urged to Increase Indonesian Investment

09/23/96

Reuters reports that GM's Indonesian partner, General Motors Buana Indonesia (GMBI), urged General Motors to ignore Indonesia's car policy and to expand investment in a potentially huge market.

Probosutedjo, president commissioner of GMBI, said "I have already told General Motors in Detroit not to be hesitant to invest in Indonesia as the future market here will be huge." Probosutedjo is the half-brother of Indonesia's President Suharto.

Indonesia's car policy offers privileges to only PT Timor Putra Nasional, a joint venture between Suharto's youngest son Hutomo Mandala Putra and Kia Motors of South Korea. In February, PT Timor Putra Nasional was given special tax and tariff breaks to produce the Timor sedan as a national car if it met local content targets of 20 percent local content target after the first year and 60 percent by the third year. Meeting the targets will fully exempt the company from import duties and luxury tax.

Japan, the United States and the European Union said the policy violated regulations of the World Trade Organization, and a number of foreign car makers--GM included--said they had deferred further investment in Indonesia until the impact of the car policy was clear.

GMBI president director William Botwick indicated that he did not expect his company to be significantly affected by next month's entry of the Timor into the market, because GMBI's flagship vehicle, the Opel Blazer, competes in a different market sector: the four-door 1,600 cc Timor sedan will sell for about 35 million rupiah ($15,000), while the five-door multi-purpose off-road 2,200 cc Blazer retails for 70 million rupiah.

GM said it had invested $110 million in its Indonesian assembly plant, and Botwick said that GMBI planned to export up to 1,000 units of the Blazer to South Africa, Namibia, Kenya and Malaysia in 1997. GMBI's Blazer has 40 percent local content and went into production in January. The company expects to make around 6,000 units in 1996; it will also assemble 1,000 units of the mostly imported Optima sedan.

Probosutedjo said GMBI hoped to raise the level of local content of the Blazer to 60 percent within one year, but this will still not qualify the company for tax breaks.

Paul Dever -- The Auto Channel