Daewoo Halts Output Due To Input Shortage

Production has come to a halt at the Surajpur factory of Daewoo Motor India due to non-availability of critical parts (including engines) and other components used in the manufacture of Daewoo's small car Matiz, sources in the company said.

Since production in December 2001 and in the whole of calendar year 2001 was still available in stock, Daewoo could manage supply at the retail level. Demand for its vehicles is also on the decline.

Daewoo Motor India (a subsidiaryof chaebol Daewoo Corporation) imports parts of its car as completely knocked down (CKD) kits from the plants of its Korean parent. The kits are supplied by Daewoo Motor Korea, another subsidiary of Daewoo Corporation, but it has no equity participation in the Indian car manufacturing arm. It, however, supplies technology and support in terms of parts and components.

Sources said a shortage of critical parts arose in the beginning of the month, which is being refurbished. "The new consignment has been cleared. Some of the containers have arrived in Indian ports and four or five of these are on their way to the plant. Production is likely to commence again in the first week of February, they added.

A spokesperson for the company confirmed there was a production halt. He, however, attributed the halt to maintenance works being undertaken at the factory.

The company claims it is selling around 900-1,000 cars per month countrywide. However, there are no official reports to confirm this. The company has also stopped reporting its sales figures to the automobile association, SIAM.

At the moment, the company is working on a new project (M150) to manufacture a new-look Matiz which is expected to be launched around April this year. Production of the existing Matiz (M100) will continue simultaneously, the sources said. The new Matiz is heavier in look unlike its "more feminine" predecessor. The new vehicle is also expected to sport a 1,000 cc engine instead of the 800 cc engine.

The success of the project depends on the acquisition of Daewoo Motor Korea by General Motors which has been delayed by a month now. Though the agreement was expected to be signed on December 20, 2001, it was postponed to end-January 2002. It now seems the deal will be formalised in February.

GM has set up a joint venture with the creditors of Daewoo Motor, in which it will hold 66 per cent shares, the remaining being held by a consortium of creditors. The company has agreed to buy two plants in Korea and two overseas subsidiaries. GM has also committed to support the other plants through supply of new technology and parts, etc. The Surajpur plant is not on the list. But executives say there is only a legal hitch as the subsidiary's shares are held by Daewoo Corporation and not Daewoo Motors, with which GM has entered the agreement. Negotiations are still on, they claimed.