Peugeot of France, will sell its stake (approximately 32%) in the PAL-Peugeot JV for nil monetary consideration to the Doshis. Necessary RBI approval for transfer of shares have already been obtained.
There was discontent brewing between the two partners over the past few years. Peugeot decided to exit from the JV when the Doshis of Premier Automobiles Ltd. refused to get additional equity in the JV. The JV's Kurla plant has been lying idle for the past 18 months, with very little production. Moreover, it has been facing labour problems.
Over the period April-May 1999, the JV sold only 4 cars, and produced 32 cars. It has failed to take advantage of the recent surge in passenger car sales, unlike other manufacturers like Maruti, TELCO (Indica), Daewoo (Santro) and Hyundai (Matiz), who have reacted swiftly. The passenger car segment in April-May 1999, grew by 3.9%, over the corresponding period in 1998. In May 1999, passenger car sales posted 15.8% growth, and 17.7% production growth.
The recent revival in the passenger car market has made the Doshis do a rethink, who have now approached ICICI to revive the plant. Sources reveal that as the plant is basically in good condition, and could be revived easily. However, the Doshis will find it extremely difficult to effectively counter competition from new entrants like TELCO, Hyundai and Daewoo who have all got very favourable responses from users for their products.
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