MUMBAI, July 13: The ailing PAL-Peugeot car venture has been further crippled due to the dithering by Autombiles Peugeot on the vital issue of buying out the Indian partner's stake. The French parent company has been singularly inactive in resolving this matter which has further compounded the crisis of depleting CKD (completely knocked down) kits and no import licence in sight.

Premier Automobiles has a 31.7 per cent stake in PAL-Peugeot valued at Rs 84 crore. The company has made it known that it would be willing to get out of the venture provided its French partner settled the payment at one go.

Peugeot has, instead, been keen on first injecting funds into the project to capitalise the losses, but this has been blocked by PAL which wanted its account to be squared first.

In February this year, the two parties reached an agreement for buying out PAL's stake at Rs 10 per share. Sources say Peugeot was keen on picking up only 50 per cent, at Rs 42 crore, a stand which was apparently unacceptable to the Indian partner. Peugeot also said that it would pump in Rs 92 crore subsequently.

Nothing has progressed since, even as the state of affairs at PAL-Peugeot's plant has worsened steadily. Peugeot sources claim that every effort to fund the venture has come to nought as PAL has made it amply clear that any such move will have to be preceded by buying out its stake. The French carmaker has been equally obstinate in insisting that this cannot be done.

Observers of the automobile industry say that Peugeot is keen on retaining a portion of PAL's stake in the project as certain components are still sourced from the company's Kurla plant in Mumbai for the 118 NE (now the Viceroy).

Peugeot also has no desire to operate in India on its own, they add, as there are inherent advantages of having a local ally. Ironically, the issue is one of settling an additional Rs 42 crore, an insignificant amount when one takes into account the daily losses that have been piling up at the Kalyan plant in north-eastern Mumbai.

For the six months ended March this year, PAL-Peugeot reported losses of Rs 68 crore while the figure was a staggering Rs 97 crore for the 15 months ended September 1996.

To add to its woes, the government has been slow in granting an import licence for 18,000 CKD kits during the current fiscal. A decision is expected this week and sources say that ministry officials are peeved that the partners in the project have still not reached any decision on their participation. "When PAL and Peugeot are not on the best of terms, the government is not convinced of their involvement in the project," they say.

Sources have also indicated that the ball is now in Peugeot's court. They fear that if the dilly-dallying continues, operations in the Kalyan plant will come to a standstill. There are 200-and-odd CKD kits still left and daily production of the Peugeot 309 is estimated at 10 cars.

"At best, in a four-day week, the kits will last for barely five weeks more," they say. If Peugeot could act quickly and pay out PAL, there is every possibility of a revival, observers add. The diesel version of the 309 is a "sound car" which offers tremendous fuel economy. Its engine, the TUD5, is rated to be among the world's best.

Peugeot also plans to bring its multi-utility vehicle, the Partner, to India for which a feasibility study has begun. As per present indications, it will come in several versions from a purely cargo vehicle to a passenger car. The Partner may be fitted with the 309's diesel engine or the more conventional XUD9.

Problems in China too

Peugeot's seems to be problems with its partners in China too. According to sources, it is all set to close operations in that country as its project has run into rough weather because of poor offtake of its vehicle range.

The Peugeot 505 is produced in China and a major buyer is the Chinese government. This has happened at a time when other players like General Motors and Volkswagen are doing reasonably well in the country. Peugeot has been unfortunate in teaming up with "the wrong partner", sources say.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.