CAIRO: The Ministry of Investment announced that it would either liquidate or sell state-owned El Nasr Automotive Manufacturing Company (Nasr), which has historically been one of Egypt’s major auto companies.
The Holding Company for Metallurgical Industries began the process of shutting down the company because it had long since ceased generating revenue. Furthermore, the company had begun acquiring debts, which, officials announced, topped over LE 2 billion.
Last month Al-Arabiya reported that the Holding Company for Metallurgical Industries adopted the decision from Nasr s general assembly to shut down the company upon the expiry of manufacturing license agreements with foreign automakers.
That debt, said Said Suleiman, quality control supervisor at Nasr, has accumulated over 40 years, since the 1970s.
“At that time, Suleiman said, “the huge difference between the cost and the selling price of cars caused the debt.
Founded in 1960, and known for producing licensed versions of Fiat, FSO Polonez, Tofas and Zastava, “Nasr has a long history in Egypt, said Salah El-Hadari, secretary general of the Egyptian Automobile Manufacturers Association.
Since then, though, the company has lost its status as industry leader.
“Twenty years ago it was one of the biggest. Today it only has 3 to 4 percent of the market, he added.
The holding company had shut down Nasr’s operations last month after slashing jobs at the company from 10,000 to 300, according to state-run daily Al-Gomhuria, by offering the option of early retirement. The 300 now comprise security and storage guards.
The reports said the holding company is currently considering liquidating Nasr or selling it to a strategic investor.
For the last couple of months, rumors had swirled about the demise of Nasr, which once represented an iconic image of Egyptian manufacturing.
As bigger companies took the reins of the auto industry in Egypt, Nasr began to fail. It recently posted losses of LE 165 million.
El-Hadari noted that contributing to the company’s struggles was that it recently lost a contract with a Turkish auto company that represented a significant portion of its business.
In the early 90s, Nasr launched a range of Fiat designed cars licensed via the Turkish company Tofas.
At the beginning of 2009, said Suleiman, Egyptian Armed Forces visited Nasr, investigating whether they would be able to take over the company.
The visit led nowhere.
Nasr’s liquidation comes at a time when the Egyptian auto industry has taken deep hits as a result of the global economic crisis. Experts, though, note that the company’s problems ran deeper and longer than the industry’s slump, which began in the last quarter of 2008.
“Based on numbers released by the Automotive Marketing Information Council (AMIC) in Egypt, passenger car sales between January and April 2009 fell 42 percent over the same period last year. This decline was at least partially attributable to the steep decline in commodity prices since mid 2008. Car prices abroad also fell, and car buyers in Egypt expected aggressive price cuts, said Nour Farag, an auto analyst at Egyptian investment bank EFG-Hermes.
Based on statistics released by Ghabbour Auto, Egypt’s largest car manufacturer and one of the few auto companies to release its financial data, the auto industry seemed to bottom out at the end of February.
The company announced that net profits were down 4 percent in 2008, owing in large part to a dismal fourth quarter performance. GB Auto is expected to be buoyed, though, by its sales of new taxis. The company announced, therefore, that it expected sales for 2009 to be in line with its 2008 numbers.
Expensive auto stockpiles were among the factors chiefly responsible for the auto industry’s slump over the last couple of quarters.
But there were divisions of Nasr that were generating income, said Maher Shehata, who worked for the company for 29 years. The training division, of which he was a part, trained employees in other industries, including petroleum and aviation.
Even these employees were forced into retirement with a severance package.
“There is no benefit from the LE 100,000 we have been offered to choose early retirement, we’d better stay and even struggle with the company and have it survive, said Suleiman. -Additional reporting by Sabbah Hamamou