TEHRAN, (AFP) — Iran Khodro, the Middle East’s biggest car manufacturer, is to receive one billion dollars in a government-backed rescue package, a company official said on on Wednesday.
Debts of several billion dollars were reportedly threatening to force the bankruptcy of the company, which has 60 percent of the Iranian car market and sends exports around the world.
“The Monetary and Credit Council finally agreed with the one-billion-dollar aid to Iran Khodro,” Etemad newspaper said.
Jamshid Imani, deputy director of Iran Khodro Company (IKCO), said half of the aid will be available “within days.”
“The rest will be paid after the sale of Iran Khodro’s shares in Parsian Bank,” he told the ISNA news agency. IKCO owns one-third of the bank’s shares with an estimated value of about 2,000 billion rials (200 million dollars).
IKCO, a publicly traded company established by private owners in 1962, exports to foreign markets such as Algeria, Jordan, Lebanon, Saudi Arabia, Venezuela and several former Soviet states.
It has built manufacturing plants in Egypt, Senegal and Syria.
In addition to manufacturing passenger cars, trucks and buses it is involved in the rail sector, airport installations and oil refining.
The company plans to make 680,000 passenger cars and pick-ups this year, Etemad newspaper said.
Imani said IKCO may also convert 20,000 billion rials (two billion dollars) of its debt to long-term instruments payable in three to five years’ time.
“If we cannot raise the company to a profit-making level, problems will definitely increase,” he said, without elaborating on the exact level of the company’s debt.
He told the state broadcaster on Tuesday that IKCO plans in addition to sell 50 of its affiliate companies to raise one billion dollars.
Leading economic daily Sarmayeh set the company’s total debt and financial commitments at between five billion and 10 billion dollars and the government aid will only cover part of its shortfall.
Imani said IKCO’s share capital is about 6,300 billion rials (630 million dollars) and it has 33,000 billion rials (3.3 billion dollars) in long-term investments and assets.
Sarmayeh said Iran Khodro will face “continued financial problems as long as it does not make changes to its managerial structure, costly (manufacturing) sites abroad and keep inexpert people who are unfamiliar with the auto industry.”
Amid a worldwide plunge in car sales following the credit crunch, other car makers which have faced financial difficulties include General Motors Corp and Chrysler Corp, two of the big three US automakers.
Both filed for bankruptcy protection in the past year as part of major restructuring programmes aimed as stemming losses.