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Murali Gopalan
Mumbai, Oct 20: Automobiles Peugeot of France is believed to have offered to square accounts of PAL-Peugeot with Standard Chartered Bank as part of an agreement which would see its final exit from the Indian joint venture.
The French automaker is also, reportedly ready, to sell its 32 per cent stake in the joint venture, valued at Rs 84 crore in 1994, for one US dollar ($1) to Premier Automobiles. Peugeot has also intimated that it will write off all dues to the parent company from PAL-Peugeot, comprising licence fees and money for supply of completely knocked down (CKD) kits.
If PAL agrees to these terms, the immediate gain will be a reprieve from StanChart which is seeking quick settlement of its Rs 40-crore dues. The bank approached the Mumbai high court to intervene in the matter and a receiver appointed has done a valuation of PAL-Peugeot's inventories and book debts which will be liquidated, if necessary, to square the dues.
StanChart filed a case nearly two months ago seeking repayment. The courthad initially directed PAL-Peugeot to begin its repayment schedule early this month. This would have amounted to roughly 40 per cent of sales of the Peugeot 309 (diesel and petrol), 118 NE and 1.38D.
The problem here, sources say, is that in the event of handing over such an appreciable chunk to StanChart, there is no way PAL-Peugeot can survive. Even the marginal output of the Viceroy and its diesel counterpart, the 1.38D, will come to a complete halt if the court directive is implemented, they add.
Hence, on paper, it will be the best thing for PAL to agree with the terms set by Peugeot as it will provide the Indian joint venture some breathing space. However, the problems of funding will remain and with the French company totally out of the picture, observers fear it will be an uphill task for PAL to set the company in order.
On the other hand, if the Indian carmaker decides to bide its time and not sign the agreement, the court will get the legal machinery moving which, in effect, means getting anepitaph ready for PAL-Peugeot. By doing so, there will be little hope of a recovery as the management will be completely bogged down in even attempting to raise finances from other sources.
"It is a Catch-22 situation and either way, the future of PAL-Peugeot looks bleak. The only benefit in agreeing with Peugeot's terms is that the joint venture can hope for a marginally longer lease of life," sources said. The biggest area of concern is this - when will the inevitable occur and what would the reaction of the workers be at that time? There are over 2,000 employees at the plant and if they were to be deprived of their livelihood, it would not go too well with them.
Peugeot took its inexplicable decision to call it quits in November last year just when it seemed that the joint venture was all set to start a promising new innings. The partners, whose feud resulted in a legal battle, agreed to bury the hatchet and at the last minute, the French company changed its mind and decided to get out,instead.
Since then, every effort was made to keep workers busy at the plant and money was raised from every quarter, which included selling used Peugeot 309 cars of the expatriates. The 118 NE and 1.38D were still being produced and on two occasions, about 50 CKD kits of the 309 were ex-bonded and assembled at the plant. There are still over 200 kits lying at the warehouse.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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This story was printed from Net Express located at http://www.expressindia.com. Net Express provides a portal to India, with news from The Indian Express and The Financial Express along with sites on travel and tourism, the entertainment industry, the power sector, the environment and much more.
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