FIAT & VOLKSWAGEN:
Carmakers in negotiations with Iran
By Guy Dinmore in Tehran
The Financial Times
February 10, 2000
Italy's Fiat and Volkswagen of Germany are holding negotiations on making
significant investments in Pars Khodro, an Iranian state-owned carmaker
to be privatised next month, Iranian officials said on Wednesday.
Ahmed Ghorashi, chief negotiator for Pars Khodro, said Fiat had proposed
taking an initial 20 per cent stake. But Pars Khodro has suggested that
Fiat join in a consortium with Iranian investors that would buy at least
85 per cent of the company, with Fiat possibly taking a majority stake
Fiat is interested in assembling the Palio, a compact car, in Iran where
annual domestic demand of 500,000 cars is about double the total production
capacity of Iran's three main carmakers.
Pars Khodro aims to produce about 20,000 vehicles this year, mostly
the four-wheel drive Nissan Patrol and an Iranian version of the Renault
The company was originally owned by General Motors of the US but was
nationalised after the 1979 Islamic revolution that overthrew the shah.
Iran's Industrial Development and Renovation Organisation (IDRO), a
state holding company for nationalised industries, intends to auction at
least 85 per cent of Pars Khodro on the Tehran Stock Exchange on March
5 at a starting price of 510bn rials (about $60m at the open market rate).
Akbar Turkan, IDRO managing director, said Volkswagen was holding talks
with Pars Khodro on assembling the Skoda in Iran in a three-way exchange
of components that would also involve Volkswagen plants in Bosnia and the
Czech Republic. Mr Ghorashi said Pars Khodro would prefer Volkswagen to
become a shareholder. "We are very interested in having foreign car
investors in our car industry, but it depends on them being interested
in Iran," Mr Turkan said.
Iran's car industry is extremely protected with only limited imports
of foreign cars. Iran also offers cheap energy, steel, plastics and average
wages for an assembly worker of about $65 a month. But foreign carmakers
are concerned by restrictive labour laws, possible political instability
and whether disputes would be settled by international arbitration or Iran's
France's Peugeot is already assembling its Peugeot 405 with Iran Khodro,
Iran's biggest carmaker.