Date:16/10/2004 URL: http://www.thehindubusinessline.com/2004/10/16/stories/2004101601450200.htm

Back Sona Koyo to pick up 21 pc stake in French firm

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Dr Surinder Kapur (right), Chairman & Managing Director, Sona Koyo Steering Systems Ltd, with Mr Shunsuke Nagai, Manager - Global Operations Planning Group, Strategic Planning Dept, Koyo Seiko Co Ltd, addressing a press conference in the Capital on Friday. — Ramesh Sharma

New Delhi , Oct. 15

LEADING auto components maker Sona Koyo Steering Systems Ltd on Friday said it would invest euro 5 million (about Rs 28.5 crore) in an auto components manufacturing firm in France as part of its plans to expand globally.

Sona Koyo will buy a 21 per cent stake in Fuji Autotech, a company that makes steering columns for automakers such as Peugeot and Renault. Sona Koyo has the option to raise the stake to 30 per cent in three years, Dr Surinder Kapur, Chairman and Managing Director of Sona Koyo, said.

The remaining 79 per cent stake in the French company will be with Fuji Kiko of Japan. Incidentally, Fuji Kiko is an associate company of Koyo Seiko (Japan), which in turn holds a 20 per cent stake in Sona Koyo.

Sona Koyo has the right to increase its stake in Fuji Autotech to 30 per cent over three years at the same price and also to proportionately appoint a director on the company board.

"Fuji Autotech would like to use Sona Koyo's quality and low-cost manufacturing base to reduce costs. As Fuji Autotech grows, so will Sona Koyo's business in Europe. Fuji Kiko Group in Europe and the US are market leaders in the commercial vehicle steering column segment, and Sona Koyo could take advantage of this technology transfer for the growing Indian and South Asian market," Mr K. Takeda, President, Fuji Kiko, said.

Meanwhile, Sona Koyo said the decision to purchase the stake is part of a two-pronged strategy.

"Firstly, to be a supplier of components to Fuji Autotech. We have set a target of euro 10 million worth of supply of components by 2008. Secondly, to use Fuji Autotech's marketing infrastructure to penetrate its European customer base. Sona's participation in the management of the company will give our people an opportunity to be exposed to European markets," Mr Kapur said.

Sona Koyo plans to use Fuji technology for making steering columns for commercial vehicles, a product which it does not currently offer.

"We should have a plan ready for the commercial vehicles market by the end of January next year," Dr Kapur told Business Line.

Sona Koyo may also consider buying equity in Fuji Autotech's subsidiaries (located in the US, Indonesia, Sweden and the Czech Republic) to increase its global presence.

Dr Kapur said Sona Koyo, along with Koyo Seiko, was conducting a feasibility study to manufacture certain components in India or Thailand. They are currently imported from Japan.

Meanwhile, the company said its profit in the three months ended September 30 jumped by 33 per cent to Rs 3.89 crore from Rs 2.92 crore in the year-ago period. Sales in the second quarter of this fiscal increased by 24 per cent to Rs 87.53 crore.