MUMBAI, March 1: The fate of PAL-Peugeot still hangs in balance with operations at the Kalyan plant reaching a virtual crawl. Insiders admit that the going has been tough over the last three months ever since Peugeot called it quits.Production has largely been confined to the Viceroy and 1.38D with no sign of the 309 (petrol and diesel) making a revival. There were plans at one time to fit the TUD5 diesel engine in the 1.38D but even that effort may not fructify for a while now.
Peugeot had announced last November that it was withdrawing from its joint venture and would hand over the job of restructuring the company to its partner, Premier Automobiles.
A request for extension of the restructuring period to January 28 was acceded to by Peugeot but there has been no progress since. Sources here said the two partners met in Paris in early February to discuss certain issues but there has been no confirmation coming on the eventual fate of PAL-Peugeot.
"There are so many issues to be settled likeoutstandings to the financial institutions, vendors, booking amounts and others.
To top it, the half yearly results for the period till September 30 will need to be approved by the board but there is no representative of Peugeot here," sources said.
The complete silence from the French automaker's side after the standstill period has been a cause for concern to employees of PAL-Peugeot, dealers and the institutions.
Reports reaching here suggest that the officers and workers are completely perplexed and worried about carrying out day-to-day operations. More than the money, it is the total lack of focus and absence of directives which has taken its toll on morale.
The perceived apathy of Peugeot to important issues like settling dues has only aggravated anxiety levels.
Ever since the last expatriate left the plant, there has been no sign of any representative coming to India to lend an ear to basic problems.
Recent reports have indicated that Mahindra & Mahindra has emerged as the most likelycandidate for the plant though company officials refused to comment on the issue. However, assuming that M&M does agree, the entire process is bound to be time-consuming and may even stretch out till the middle of this year.
Sources familiar with the daily operations of PAL-Peugeot say that the licence contract for the 309 could hold a key to the survival of the plant. Some automakers believe there is an attractive consideration in manufacturing the TUD5 engine for other players like Hyundai Motor India and Maruti Udyog who plan to fit it in their range of vehicles.
The only grey area here is that the original licence provided for use of the engine for the 309 and was not intended to be used as a separate business proposition for PAL-Peugeot. If Peugeot insists on this condition continuing for the new buyer, it could lead to some hiccups.
For instance, a candidate like M&M cannot fulfill this requirement of producing the 309 fitted with the TUD5 as this would translate into direct competition with thediesel Escort manufactured by Mahindra Ford at Nashik. The other issue could well be M&M's lack of interest in reviving the 309 in the first place.
Now, if Peugeot were to deny granting extension of the licence contract to the new owner for supply of the TUD5 engine to either Hyundai or MUL, the Kalyan plant may not be an attractive option.
As sources say, a practical outlet for Peugeot is to allow commercial manufacture of the TUD5 as this will guarantee continuity of operations. Thus, even while the memorandum of understanding with PAL stipulates that after the standstill period, Peugeot can resort to a series of options like liquidating PAL-Peugeot, disposing of its equity to a third party or revoking its technical support arrangements, these would only mean seeking the easy way out for the French automaker.
Observers reiterate that PAL should be given more time for seeking a solution to restructuring the joint venture.
They say that Peugeot, in turn, could keep its presence in India intact byensuring that the TUD5 diesel engine is extended to a host of other cars using the Kalyan plant as the supply base. This will make up for the company's sudden withdrawal from its joint venture here, observers add.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
