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WMMI’s vehicle production remains depressed
By Golden Sibanda
TROUBLED Willowvale Mazda Motor Industries’ production capacity has remained at between 15 percent and 20 percent since early last year, as financial constraints, external competition and low demand took a toll on operations.
The embattled car assembler is already "seeing red" after failing to repay a US$3,4 million debt to Japanese carmaker Itochu, which supplies its Mazda kits.
Many firms recorded some growth in output last year, albeit marginal in many instances, after dollarisation and an improved operating environment, but that did not impact positively on the country’s biggest car assembler.
WMMI managing director Engineer Dawson Mareya confirmed that production was not improving due to low demand and increasing external competition.
The local firm contends notable competition comes from neighbouring South Africa, whose exporters enjoy up to 47 percent rebate under the Motor Industry Development Programme and, therefore, export at lower prices.
"The situation (15-20 percent production capacity) has not improved due to lack of demand and competition from the imports. People want the vehicles, but they do not have the money. The reduction of duty on imports has also done away with advantages we enjoyed through duty," said Eng Mareya.
Earlier, WMMI said higher duty thresholds meant that importers brought vehicles into Zimbabwe at a higher cost and that enabled it to compete favourably.
While the company has been struggling in the last few years due to a general downturn in the performance of the local economy, the situation worsened last year after fiscal authorities reduced duty on one-tonne pick-up trucks.
Finance Minister Tendai Biti further reduced duty on half-tonne pick-up trucks when he presented the 2010 National Budget in December last year.
He reduced import duty on one-tonne pick-up trucks from 40 percent to 20 percent when he presented the 2009 Medium Term Fiscal Policy Review and on half-tonne trucks from 40 percent to 25 percent last December.
This has choked the company and early last month WMMI said vehicle sales had slumped by almost 70 percent as external competition increased.
A sharp drop in demand for the company’s locally assembled vehicles has also been blamed on the liquidity crunch pervading the local economy and lack of lines of credit, which constrained individual and corporate capacity to buy vehicles.
WMMI is also facing serious challenges to retire a US$3,4 million debt to Itochu, which has resulted in a stockpile of more than US$5 million worth of kits at the firm.
The company’s board chairperson last week said WMMI had been given until March 18 to settle the debt and warned that failure to do so could result in collapse of the firm.
Eng Mareya said the company is yet to get the funds to clear the debt, and this means the vehicle-assembling firm will not enjoy more credit benefits from the Japanese carmaker, usually paid when local stock has moved.
The company’s managing director has, however, not lost hope and believes the vehicle-assembling firm would recover as economic conditions improve.
"We believe this is only temporary and will pass once the economy gets better," he said. |
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