French automaker Peugeot withdraws from India partnership

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BOMBAY -- Underscoring the difficulties of working in Asia's emerging markets, France's Automobiles Peugeot has decided to withdraw from its Indian joint venture after its local partner tied with Italy's Fiat Auto.

The French automaker said in a statement from Paris that it will offload its 32% interest in Bombay-based PAL-Peugeot to Premier Automobiles. Peugeot will also withdraw a lawsuit filed in the Bombay High Court that accused Premier of violating a non-compete clause after it announced plans for a car joint venture with Fiat.

"This is a divorce," Peugeot stated. "We weren't getting along well. They wanted to go and make money elsewhere."

The four-year-old joint venture has rung up estimated losses of $25 million, due in part to long labor unrest and poor demand for its Peugeot 309 car, an early 1990s flop from the Peugeot stable, and another old Fiat model whose manufacture was ceded to PAL- Peugeot.

Peugeot will continue to supply kits for assembling the 309 model, however. Last year 5,300 Premier 118 NE and 1,900 Peugeot 309 cars were produced. This year's estimate of 8,000 cars includes 2,000 Peugeot 309 vehicles, a marginal increase mainly to produce cars with diesel engines, a concept fast gaining popularity with Indians.

The French company also recently withdrew from China after operations there proved unviable. Both markets have attracted a rash of carmakers after economic reforms got underway.

Rhizic Communications, Bombay, handles PAL-Peugeot. The marketer spent $2 million, up 75.7% on TV and in print media last year, according to ORG-MARG figures.

Copyright December 1997, Crain Communications Inc.

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