It's been a lifelong dream, and M. Sinivasan is determined not to let Indonesia's deepening economic crisis shatter it. Ever since he started making fabrics with a single hand loom in a storefront 35 years ago, Sinivasan has methodically built his Texmaco Group into an industrial power that makes everything from machine tools to auto parts. The crowning moment comes in September, when Texmaco plans to roll out its first truck, the 7.5-ton Perkasa. "The best time to hit is when the morale of our competitors is weak," declares operations director H.N. Subba Rao.
Brave talk. But Sinivasan's truck operation will be lucky to survive 1998. Car sales in Indonesia are projected to plummet 75% this year, to just 100,000 units. Even keeping plants running is tough, since auto makers can't get financing to import key parts. Texmaco's plight appears particularly grim: The $2 billion group must repay or reschedule $200 million in offshore loans this year, and its main rival, Mitsubishi Motors Corp., is sitting on a full year of unsold inventory.
A brutal auto shakeout already is under way. Indonesia's No. 2 assembler, Indomobil, has temporarily shut its Suzuki and Mazda plants as it tries to clear an inventory of 40,000 cars. Even ventures of President Suharto's family are crumbling. Timor Putra Nasional, the "national car" program run by his youngest son, Hutomo Mandala Putra, has been shattered, leaving 15,000 Kia Sephia sedans on the lot. So, too, has a car venture by son Bambang Trihatmodjo with Hyundai Group, while Suharto half-brother Probosutedjo sold his stake in a stalled General Motors Corp. plant.
IMF WOES. Making matters worse is Indonesia's floundering attempt to restructure some $70 billion in private debt with foreign banks. And fears that a $43 billion International Monetary Fund rescue will unravel have kept Jakarta from receiving $3 billion in trade-credit guarantees pledged by Singapore, the U.S., and Japan. Auto makers are bracing for two or three more ugly years. "It's as if we've hit a wall," says Teddy Rachmat, president-director of Astra International.
When the economy does improve, Astra expects to be one of the few survivors. As assembler of seven brands, including Toyota and its own Kijang minivan, Astra has 55% of Indonesia's car market. So far, it has laid off less than 10% of its car workers. But it sold only 100 Corollas in March, and Toyota won't let Astra export. Astra has been closing its Kijang plant for days at a time to cut costs. Falling car sales are bad news for parent Astra Group: It must repay 35% of its $1.7 billion in offshore debt by yearend.
Indonesia once thought '98 would be the year its auto industry would arrive. Instead, it's a nightmare that won't end.