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Premier Auto ties up with Mitsubishi arm for multi-utility vehicle

The beleagured Premier Automobiles Limited, or PAL, has entered into an agreement with a Mitsubishi Motor subsidiary -- China Motor Corporation of Taiwan -- to foray into the light multi-utility vehicle, or MUV, segment from its now-defunct Kalyan facility in the current fiscal.

The MUV, due for launch in the current financial year, is expected to mark the company's comeback into the passenger vehicle manufacturing arena. It would also mark reopening the now closed Kalyan unit that belonged to Premier's erstwhile joint venture company -- PAL Peugeot Limited, or PPL.

PAL chairman Vinod L Doshi said the MUV project is a result of the 18-month long exercise by its management team towards repositioning PAL to cater to the available opportunities and niches in the passenger car segment.

''Since Fiat (its existing partner) is fully entrenched in the passenger car segment, PAL has identified a family vehicle which can cater to the transport requirements of the non-metro, semi-rural and rural segment,'' he added.

The yet-to-be-named product has been developed in technical collaboration with China Motor Corporation and will be powered by the Euro-II compliant Peugeot TUD5 diesel engine.

''With more than 75 per cent already localised and requiring very little incremental investment as the capacity at PPL's Kalyan factory is readily suited and available for this product launch in the current financial year,'' Doshi said. The company has estimated a full production volume in the range of 10,000 to 15,000 vehicles per annum.

The company is planning to enter into a conversion agreement, similar to the existing one between PAL and Fiat for the Padmini at Kurla, with PPL's Kalyan plant, ''thereby attempting to initiate the process of rehabilitating and revitalising this otherwise closed factory''.

Doshi, in a statement to shareholders, said the company has ended the 1999-2000 fiscal with a loss of Rs 126 million. He attributed the loss to stoppage of production caused by the temporary liquidity problem faced by the company.

''The main reason for the liquidity problem was due to the fact that after the spin-off of the Kurla plant, the company repaid all its loans and was virtually debt free as part of that deal. In September 1998 itself, we initiated the process of raising fresh facilities for Padmini production. However, banks were very negative about the auto sector at that time due to the recessionary situation prevailing then,'' he added.

Besides, the banks felt that the new entrants such as Indica, Santro and Matiz would replace Padmini in the taxi market and hence the company's future was perceived as uncertain. ''This caused them to progress our case slowly which delayed the working capital, thereby affecting production.''

Doshi stated that despite being out of production for one year, the taxi segment still continues to prefer Premier Padmini. ''With 55,000 vehicles totally and a large portion of this population needing replacement, there still exists a strong demand for our cars for the next few years. With finance available, the company has geared up all its activities to produce Premier Padmini model with petrol, compressed natural gas, or CNG, and diesel options and is in the process of obtaining the requisite pollution certificates.''

Regarding PAL's joint venture with Fiat, Doshi said PAL has decided to freeze its investment at the original level even if it meant dilution in shareholding percentage.

The joint venture company -- Fiat India Limited (formerly known as Ind Auto Limited) -- was floated as a 51-49 venture with Fiat controlling the majority stake.

However, Fiat has now hiked its stake to 93 per cent. Fiat will be infusing additional $ 10 million into the venture to further increase the stake to 97 per cent. The Italian company has already bagged the Foreign Investment Promotion Board, or FIPB, approval to totally buy-out the Doshis in the venture.

UNI

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